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Don't trade with money you're not ready to lose; go do some other trades/business with it. In any case, in any business/trade, you gain and lose, yes BOTH. If you're ready to lose some and gain some to a level skewed to your profit expectation, then profitably and confidently PULL the TRIGGERS. Let your method(s) be based on wisdom and good knowledge of the market and the players (Brokers, Data Feeders, Trading software vendors, your hardware infrastructure - computers, internet connection, power supply ..., etc); and every other good thing shall be added unto you ... Amen !!!
I think it is all about confidence in your system. If you don't trust your method, you will second guess every trade. First you have to know the market environment your method is designed for, and only trade when the market is in that state.
Then you have to work out the expectancy of your system, and rely on that. If you know your system takes an average of 10 trades per day, and generally wins 7 out of those 10 trades, then if you should have 2 or 3 losers, you will not have much fear on pulling the trigger on the next trade. But if you get up to 5 losers, then you automatically know that you will most likely end up with a losing day, you can now decide to quit, and wait for the next day, or rely on the system expectancy an continue trading to minimize the losses.
But expectancy works on historical data, so it is most accurate if you use fixed stops and targets, or a very consistent entry/exit approach. If your entry or exit is discretionary, it all goes out the window, because the emotions will be back with full force and affect your entry and exit decisions. Then, the historical stats become meaningless, unless your emotional state was included in the statistical data. That would imply that the statistical data is based on 100's of actual trades in the live market. You can't rely on expectancy derived from systematic statistical data, or from discretionary sim trading, and expect the results to be consistent when you start trading live with the emotions associated with real money.
I you have a mechanical system with good expectancy, then moving from sim to live should be relatively consistent. For a discretionary system, going live involves a whole new stage of emotions you have to deal with, that will most likely not reflect your sim results. In that case, I would suggest going live with reduced trade sizing to survive that adjustment period.
Ultimately, you need to have confidence in your system, or in your discretionary judgement.
You indicated that your 'firm system' provides a 3:1 win/loss ratio...very nice. What was the overall percentage of winning trades v. losers while in sim...and did it include slippage?
If you had taken all the live trades you should have been taking does the results appear similar?
Can you tell us a little about the value of your profit goal and 'stop' in ticks?
On first blush, I would be inclined to think you may be undercapitalized to trade the strategy intended as a 3:1 win/loss ratio implies there could be a few 'losers' before you achieve your target..
Can you tell us as % of your account the average risk per trade and is it flatline or do you increase your allocation after losses?
The advice you have been given has been very good...even if the guy from texas doesn't remember anymore what it is he offered
You bring up a good point monpere. I found out most of my bad trades were on days the market was in indecision, kind of like the state the market was in today after the last few days of downward trends.
Well the 3:1 win loss ratio can be a bit deceiving because I usually have my winning trades limit around .4-8 ticks and my losing trades stop out around 1 point. So with 4 trades I can expect to make .5 ticks modestly. I do this because sometimes trades will go in the opposite direction with the average volatility of no more then 10 ticks on the Russell before it'll come in the desired direction. However, sometimes I will pull out early If a given duration of time passes and the setup changes shape.
However with certain systems on the demo my win loss ratio would increase. Sometimes using the demo I could get 8 out of 10 trades winners with the two losers only taking a couple ticks because I pulled out early. This is because I forced myself to take every good trade almost robotic. Sometimes using the demo I'd experiment with position sizing. Inevitably I could always come out profitable at the end of the day using larger position sizes on good trades to make up for the losses and then immediately reduce the position size for the next trades. I took this theory and applied it to my own account size by only taking the most probable trades with minimum contracts and just not trading the rest.
My strategy mainly takes advantage of catching the Russell 2000 out of synchronization with the ES. I usually 'fade' the Russell 2000 to the ES or Just trade the difference. I measure angles of rallies or drops and look to see if they can reach the next previous high or low without exhaustion. I take the economic news calendar into consideration to see if there is a directional bias from some release. Obviously, there is some more complicated analysis going on I don't wanna bore you guys with the details. I'd just like to say I've found my strategy works best when the market Is in a certain 'condition'. I feel like certain traders take these days off and other traders step in. Or, maybe they just switch systems. Perhaps more Long term investors step in at times of indecision and make moves throwing the short term traders off. I'm not sure, but I think I'm just going to stick with the system I know best and trade only when the market agrees.
My futures account started at 2000, the minimum amount to open an account, and I lost 250 to 300 a few times starting out which I've made back over time using better systems. each losing trade has a potential of a 5% loss. If I had a larger account I'd only risk 1%. Although the money is discretionary, I'm still being extremely cautious until I make another thousand or two. But knowing that I'm only trading one contract which requires a margin of only 500 dollars It shouldn't matter much considering my win to loss ratio and selectivity. I know this Is chump change to most professional traders because when trading the demo I'd often time trade 3 contracts at once making 300-1000 or more a day. I've read many places that you should start with at least 10k discretionary cash but I'm just going to have to make due. I'd prefer to be able add to losing positions to make up for the lost in expectation of exhaustion or scale to probability but I'm just going to have to only trade great setups. In the last few months of demo I tried to trade like it was real money with only one contract. I spent a couple months watching the market with out trading just to observe critical sweet spots of high probability. I notice the highest probable trades come after you get the inclination to trade when the price swing almost has no other option but to move in your direction.
I've spent many months trading chartgame.com daily stock candles with no indicators. I've made it from 10k to one million one night with several hundred trades through time-lapsing. Its pretty difficult and definitely not a leisurely activity if you plan to make over 30k but It has definitely improved my game. I know daily stock candles differ in behavior to emini indices because they don't have the intra-day patterns but I still find them helpful. I've used indicators the first few months when I started trading but decided to just use my own interpretation of price swing length and angles with volume and simple arbitrage because I feel having a sixth sense for whats going on is more reliable.
If anyone knows any emini data simulations like the chartgame.com that allow time lapsing i'd highly appreciate it if you could tell me. I've tried to do this to practice at night time but find it hard to scroll accordingly.
I'm also trading currency in demo atm. I like to have a larger window between my limit and stop with currency to account for the spread and random nature respectively. I find it's easier to trade emini indices at the moment because of the simple 1 tick bid/ask difference and the relatively stable movements.
One thing you can try is mixing up Live and Sim trades - so say Sim 5 Live 1 - 5 - 1 - 5 - 1 etc...
One of the great challenges in trading is executing your trades when it dont mean jack the same way as when you've got your c0ck in the custard. That migration from trading profitably in a simulated environment to executing the same strategy in real markets is not an easy task - where alot of people go wrong is they try to do it in one fell swoop, panic half way through and blow their account.
Take your time. After a while you will see that most of the time the market doesn't know or care if you are long or short*, and that the market behaves the same way whether you are in or out*. It then becomes an exercise of not being able to distinguish your Sim p&l from your Live p&l. Once you've got the 5 - 1 looking the same, move to 5 - 2 or 4 - 1 or 5 - 2 or whatever.
Bottom line just move over to live slowly, theres no need to put all that pressure on yourself by jumping in at the deep end.
* this sort of assumes you are punting a handful of lots in a futures market. If you are accumulating thousands of contracts then its not so straight forward.
Hi Joseph, I started trading the NQ in mid-February then started a daily journal here at the start of March in order to test my indicator and develop a system that I could earn a living from. What I found was that occasionally I would hesitate even when my indicator gave a buy or sell signal. Now I knew that my indicator could give me good entries sometimes but I hadn't quantified it properly, so I didn't know what % of signals would generally work or not. As I built up a spreadsheet and gained stats on it I saw that generally 50% of the signals were correct, it also showed that on average for every dollar risked I would get 3 back. This has helped me enormously and I don't have that issue any longer.
Another way to look at it is this. What are you? You are a trader. If you have a proven strategy that is profitable then if you see a good setup and don't take it, at that very instant you are switching from being a trader, to being a gambler. If you do this you are effectively gambling that the next good setup will be a loser, a very risky thing to do with a profitable strategy. Something else I have done is to mentally pledge 15% of my net profits per year to various charities, so you see this adds a further dimension into the equation, if I then don't take a setup I am potentially letting others down (the charities). So it's not just me who has a stake in my success.
"The primary thing required to obtain what you want from life, is simply the will to pursue it, and the faith to believe it is possible." - Author Unknown
"The ability to maintain discipline and stick to the rules is the hallmark of the experienced successful trader" - Curtis Faith
for what is worth... IMO, based on personal experience, fear and hesitation will be a function of three things:
1) Account Size
2) Confidence
3) Mental State
If you are trading a $5K account, then the % @ risk will result on some large equity swings that your mind will not be willing to handle... that compounds even more if the money is not true @ risk money and perhaps you are unemployed and under pressure to produce to maintain the family, and situation deteriorates even further when you are not certain of the "setup" because of whatever reasons...
compare that to having a $50K account min, being employed and making $200K a year, and having the expectation that your setup works 70% of the time... at that point in time the challenge will be having realistic expectations as to returns... not every day will be a winner.. that simple.
I had similar challenges, but mainly because I was risking my whole retirement account most of the time and that created stress for me...
I found a good video from PARoom that addresses the subject, I spent the $99 myself...and I found it to be of use... it made me realize that I needed to break up my account into portions and only trade what I would be willing to risk for the year, which lead me to creating multiple accounts, each focused on one thing and one thing only, and properly capitalized for what I wanted to do... also, I started keeping a paper based journal that would record my thoughts and state of mind, nothing to do with trading statistics, but rather how I got up, what I had for breakfast, what I was thinking, what worried me, did I slept ok, etc.
check the site, it might help you as well.. but keep in mind that all it will do is make you aware of the issues that you might face, it provides some answers, but not all might apply to your situation.
Humans are naturally most averse to loss. Personally the pain of losing is worth 3X the joy of winning. I've done two things to address this issue with my trading:
1) Make the pain of losing less than the pain of something else. For example when I don't follow my system (you do have an accountability partner right?) I have to buy my wife an expensive piece of jewelry. $1000 piece of jewelry or take my loss on the trade $150. Hmm tough decision.
2) If that isn't enough public humiliation. When I was going through a particularly stubborn stint of not following my trading, my wife would brag in front of her friends about me being a losing trader and how much jewelry she got out of my "hobby". Even worse was when she bragged to my mom (who hates the fact that I trade). Needless to say I haven't had this issue since.
If these ideas don't fix your fear then I would suggest that you haven't tested your system thoroughly enough.
One last suggestion is to not think of trades as individual trades. I try to see my P&L reflected over the past 60 trades and where the next 60 trades are going. Since I tend to overtrade my goal is to only take the trades that are in my system (and are crystal clear). As mentioned earlier the harder the trade is for you to take the more you need to take it (assuming that it follows your system).
