[my] trading - psychology, performance, coding and other assorted ramblings

[f2calv]

I've been having quite a lengthy run of bad trading [profitability] for the past 6 months. I figure a journal detailing my struggles/thoughts might be worthwhile for me and also hopefully enlightening for others.

I look forward to any comments on trading psychology, trading analytics/statistics and fintech coding amongst other things.
I will only post here occasionally.
This is not meant to be a thread for live calls, although I might put a cheeky one on now and again.
Generally I loiter with other indices traders on http://www.trade2win.com/boards/indices/120172-anyone-scalping-ftse-futures.html

Background
I would classify myself a momentum/trend following trader.
I frequently pyramid my positions.
I have a bad engineering degree from a good Uni.
I've been a self-employed web/database developer/systems architect for 20 years, for the vast majority of that time using Microsoft technologies such as C#, SQL Server & ASP.NET.
Generally I trade the indexes via a combination of CFDs, Spreadbets and leveraged ETFs.

Recent History
Monday 10th August 2015, I saw the indexes starting to fall over and I was getting a generally bearish vibe.

I was short the DAX & DOW from early doors, and figured I'd hold out any rises for a long term swing trade so convinced was I that a correction was imminent. Typically my initial position size was way too big AND I averaged down and the indexes rallied like homesick angels right into the close. My account was -15% at about 9pm that evening and I was utterly emotionally drained by the algo-squeeze or whatever it was that had just happened.

I knew I wouldn't get any sleep worrying about my positions so I told the missus that I was going to kill the positions... but also told her that sods law says the markets would correct overnight. In the early hours China started the Yuan devaluation process and the August correction properly started. Sods law was bang on the money.

Anyhow I recovered my account back up to it's starting position over the following couple of days, but my emotions had taken a battering, and ultimately there started a slippery slide.

I scaled back position size and continued trading and a lot of the trades in the months following have been technically great in their own right (>3500 points on GBPAUD) yet after the previously incurred losses my lack of balls and lower position size means my account is overall unchanged at approx -19% as of today. Since October I've generally not been "feeling it" at all and. So during the last few months I've been doing a lot of soul searching, trying to figure out what I need to do to remedy the situation, don't worry I'm not going to get deep and meaningful here...

Progression?
Like most of you probably have, I've been researching lots about trading psychology [because I know my problem is generally psychological] reading lots of articles and listening/watching to a lot of interviews (a few notable ones below);

• https://www.youtube.com/user/ukspreadbetting/playlists (Steven Goldstein, Mark Fenton, etc...)
• http://chatwithtraders.com/ep-039-tom-dante/ (took a while to sink in but in there was a bit of an eureka moment)
• http://chatwithtraders.com/ep-011-zach-hurwitz/

I have [only] been trading since Jan 2014 so ~2 years now, when I first properly joined in these forums about 18 months ago I was keen to see how much money people were making from their trades - basically because I was new and had no trade ideas of my own and would put more weight behind opening a position if an idea was posted and I knew the poster was trading from a big account and/or making more money per trade than someone else - I generally figured the more money they put behind a trade the more serious they are about the trading business!

I have since come to the [completely obvious] conclusion that just because you trade a big account doesn't mean you're any better a trader than the next dude [yes I'm blond, so it took me a while to figure this out!].

So ultimately I realise the simplest way (but maybe not the best way) to compare one trader to another is by comparing their points won/lost, similarly the only way to monitor performance over extended periods of time without ego getting in the way would be by points won/lost per week/month/etc.

Looking at my primary trading account, since it was opened August 2015 I'm down 19%, and although January has been positive I've actually barely traded this month. Preferring to immerse myself in coding rather than embrace any positions - I'm not too scared to trade [yet] but certainly I feel I am scared to lose and definitely less gung-ho at opening new positions than I was 6 months ago.

A eureka moment came over Xmas, highlighted in Trader_Dante's interview (link above), in that I was entirely guilty of *trading my P&L*. At the end of each trading day I was saying "today I made £xxx" or "today I lost £xxx" and as long as I finished up at the end of the month then "it was a good month".

The point behind monitoring points won/lost and "not trading your P&L" - becomes become more obvious when you trade a demo account. Obviously we can all(?) grow a demo account from £10k to £XXXXk if we have enough free time and inclination, simply because the money doesn't mean anything to us - we just mentally remove the pound/dollar sign and use the significant figures as a way of keeping score... albeit with massively wide stops!

Looking at my past few months trading;

What conclusions can be drawn from this limited information?

August, September and December seem to tally, in that net points was negative and there was a negative P&L.

However November had a massively negative number of winning points yet the P&L was positive?

January had a massive surplus of winning points, yet only a P&L gain of 3%... so this has highlighted to me my poor money management. Leading me to wonder that had I traded consistent size positions throughout my results would have still ended up with a negative P&L yet maybe not by quite so much, or maybe by even more!?

So in future posts I'm intending to work out some more statistics based on my past trading and hopefully post something more conclusive regarding my trading history - and see where my strengths/weaknesses lie.

In addition I'm going to use my coding skills to work on ideas of trading with less emotion, with an ultimate aim of trying to replicate the success of trading a demo account inside a real money account... tall order I know.

Cheers for taking the time to read a somewhat haphazard first posting

 

[dbphoenix]

Your problem has nothing to do with psychology. Your problem has to do with your not having a thoroughly-tested and consistently-profitable trading plan. Without it, you are essentially guessing.

You may want to read the following *click*. It's only one page.

Db

 

[itspossible]

f2calv-good honest thread-ill comment later and ask the dreaded probing questions lol.

 

[darktone]

Imho, sort your head first, then youll be open to explore the methods most cant.
That is your edge, over them.

subscribed

 

[f2calv]

Your problem has nothing to do with psychology. Your problem has to do with your not having a thoroughly-tested and consistently-profitable trading plan. Without it, you are essentially guessing.

You may want to read the following *click*. It's only one page.

Db

Thanks Db - all points noted - in your linked post you entertain the existence of an "edge" (as Darktone also suggested), I realised only a few months ago that coding is going to be my edge - or at least the majority of it. Hence coding against various broker/market maker APIs right now is allowing me to a) get a better understanding of the engines behind trading and b) dig deeper into my trade history to see where I've gone wrong and what I've done right.

As for strategy, you are right in that I didn't have any strategy at the end of the summer last year - however now I'm being more selective and entering less trades and planning my entries for maximum reward vs. risk so I believe I'm on the way - if I can only hold onto the winners for longer being the immediate problem. Cheers

 

[dbphoenix]

Thanks Db - all points noted - in your linked post you entertain the existence of an "edge" (as Darktone also suggested), I realised only a few months ago that coding is going to be my edge - or at least the majority of it.

It will be your edge only if the market behavior that you're coding "offers a level of predictability that provides a consistently profitable outcome over time." Coding in and of itself is meaningless.

Lecture over.

Good luck to you.

Db

 

[tokyojoe]

Good post #1 f2, I for one am glad to have read the market behavior in my own way, my own time, looks like you do too.

I have days where I get slapped around mate, days where mr Magoo would see the move before me, there is no way on Gods earth anybody on this forum will convince me the markets produce predictable trad-able conditions all the time & that they have it on toast every day as retail, total b@ll@cks !
Sure the levels, TL's, S/R areas, the ying & yang can all be mapped & predetermined, after getting used to the charts this becomes second nature, but this game requires digging deep into what is happening in the moment of the potential trade inception, it is very very tricky, I know price structures & most conceivable scenarios, but this will not help me if my entry is too early or too late, the value is lost in the blink of an eye. Of course the value offered to me as lowly SB fodder is also taken into account, we can never know if the price offered is truly fair (even with a dma feed) they offer, we accept, or decline, ya takes ya chances at the end of the day !

I've always considered entering with a gargantuan stop as not for me, tried it numerous times, it will eventually be a nasty undoing imo. One of the skills is the reading of the price shunt, there is always a shunt, be it in your favour, to run, or not, to do serious potential harm (or stagnation = get outa dodge)

I have reduced my time on any given day to about 2.5 hours max, I really do not understand why people would want to be trading all day long if they know what they are looking for in their set ups, the price flow etc, surely their money can be made (or not) without the need to churn all day clocking up the 20 gazillion hours (I am talking about guys with years of experience here, but the learning process does of course require the exposure time).

I reckon you have the nous to just ride it through mate, code, or no code, you seem to have a deep understanding of what you are about, this is your edge.

 

[Strugglingtrader]

We exchanged private messages I believe around the time you mention in your post. You may recall my own frustration of having suffered a major loss where I was frustrated as I wasn't making the cheddar that I felt I should be making.

You termed it revenge trading and you were right, but sometimes that's what we need to kick ourselves into gear and push ahead. In our job there is no one to push us other than ourselves, so we have to lift ourselves up, brush off and start fighting again. Having a tough life helps in this, if you've had it good you are unlikely to survive as a trader or when the big fall comes have the heart to rise again. I've seen big traders fall into depression when the going got tough.

The one thing I did you may recall is that I "reduced my size" considerably and that was frustrating me, but what it was actually doing was helping me build my confidence back. Small trades & gains compound to bigger trades and eventually you blast through the break even point. What you need to do is of course have a plan and it is clear to me you have a plan because there is consistency although volatility in your returns. But build up your confidence with small successes that build into bigger successes.

Confidence is the driving reason you or anyone does not let winners run because we want to bank the profit as it may decline, especially after having a large loss or being still under the water mark.

Watching the first episode of Billions which I mentioned recently was brilliant because the hedge fund actually have an in house psychiatrist/HR manager. What a great idea, we all need that, our better halves can only support us so much. We all need reminding of our successes, especially when we are looking down the abyss having suffered a particularly poor draw down. In the words of Wall Street that's when we find our character.

I've had a very tough life, I've been screwed over more times than Wendy on crack, I feel the market nor anything can hurt me anymore as a result. I expect to fall and fail but I know I have the heart to get up again. 'Get up you son of a bitch cause Mickey loves you!

With respect to points, I think this is not entirely correct. I think amount of money is very important not just how many points determine the success. While at a hedge fund I used to think in millions, at a prop desk I started thinking in the hundred of thousands and as a day trader I now think in the thousands . My emotional state completely changes with size and as such part of trading involves amounts and getting emotionally comfortable with size. You can't just think in points because you want to move from hundreds, to thousands to millions and that requires getting totally comfortable with amounts at each stage, which you just wont get to do with points and hence you can't just think of trading success in terms of points.

I admire Soros incredibly and it would be an insult to him to say I trade better than him with my little capital on a point basis because I generate x% a month while he manages x% a year right.

 

[Fugazsy]

Good read and thank you for sharing.

Subscribed.