I'd like to present a personal obstacle I've been having trouble with towards trading recently. My problem is initiating live trades on a consistent basis even when I see good setups. I've used a demo for a little over a year and have finally developed a firm system for trading Emini indices with consistent profits, namely a 3:1 or better win to loss ratio. On the contrary, I've never had a problem trading the demo, but when it comes to real money I get very hesitant or cautious. I lost a significant portion of my account when I first started learning to trade by trading on Impulse with out much conviction. Since then, through being very selective I have made it almost all the way back. but, the last few weeks I've only been able to watch the market while seeing good trades come and go with out the courage to pull the trigger. Has anyone had this same problem and could you offer any advice or direct me to a similar post.
I know risk and the occasional loss are normal and part of the job, but I just can't rid myself of the aversion feeling recently. If It were possible I could just force myself to trade like I do with the demo I'd be happy. I guess i need to lose my attachment to the money I've worked so hard for and rely on my statistical advantage through all my back-testing and research, I just don't know how to implement this live.
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1) There's a reason that the number 1 commonality among losing traders is undercapitalization. That's because having low starting capital means that you're having to undergo larger risks (and there's the burden portion as well). Essentially, it's a much more emotional event when you're trading 80% of your capital than when you're trading 5% of your capital (on the same move).
2) What you described is exactly why I went to auto trading. Auto trading reduces the indecision (for both entries and exits) which can diminish or even eliminate opportunities. It also helps to ensure that you stick to your "plan."
Anyone who tries to tell you that there's little or no difference between simulation and live is either an emotionless traders, has so much money they just don't care, or is a fool. Obviously, increasing your starting capital to a less emotional level isn't really a viable option for most traders (which is why it's such a commonality for failing traders).
I would recommend TRYING some automation in your trading. If you're having difficulty on timely entries, try automating the entry setup to issue you an alert (you can still manually enter). This concept was popularized by systems such as "Wizetrade" where you get a series of green or red lights. When all the lights are green, all your entry requirements are met.
I respectfully disagree with nearly every point you make.
Yes, under-capitalization is a characteristic of many traders, however, it is not the cause of losing. If you focus on the percentages rather than the absolute dollars, then every trade can be managed with the same discipline and responsibility as another.
I do not view auto trading of any value to the amateur trader. He still has the responsibility of selecting the bot to trade. I am a retired software engineer and know the limitations of software. Unless its been tested to the level of a medical device going in my body, I want my brain and fingers between the recommendation and the execution of a trade. A financial advisory who you can communicate with and who understands your goals may be a better alternative.
I do not even like red light/green light systems unless the trader understands the basis of the strategy.
With respect to the OPs concerns, besides always focusing on the percentages rather than the dollars, I take another step into trading with serious money. First, paper trading has some limitations when it comes to testing a strategy and developing expectations for performance. So I move to small money trading. Only when I have several trades under my belt and I am getting the expected results do I move to serious money trading. If I change a rule, it is back to small money trading or perhaps back to paper trading. It's not only about confidence, but about effective risk management.
If this three step confidence building does not permit the OP to pull the trigger, than perhaps trading real money may not be his thing.
If it is to be, it is up to me.
All I Know About Trading Options I Learned in Flight School
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Part of the solution probably is hidden in your own words. You need to implant in your mind that each time you skip what turns out to be a profitable trade you are indeed losing even more than if your stop would have been hit considering your risk:reward. Not taking a trade that has some merits is a losing behavior that will hurt you more than if you had took the trade. Here is what i'd try to do, if you can categorize your trade like low, medium, high potential then start by taking systematically the high potential setups. At the beginning, just take one of these trades a day. If on average such trades occur 2 or 3 times a day then just take one of them to begin with. Then as your confidence increases add one more trade etc. The trick is to persuade your mind that not taking such a trade will hurt you. Change the target of your aversion feeling.
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There is a man named James Dines who's investment advice in rare earth element stocks gave me great returns. He has written books on trading psychology where he talks about how when you feel like you MUST make the trade or investment it is usually a bad move. Conversely when you see a good trade or investment you are often reluctant to do it. It's not like that for everyone but it is for you and me.
I haven't come close to overcoming it 100% but now recognize the emotions so not to be controlled by them.
The most important thing for me has been sticking to what I know works (for me), sticking to my rules even though they will not be 100% perfect, and recognize when I'm not in a good state of mind to trade.
For example, I'm not in the "zone" when not taking into account as many things as I would otherwise. Then I just get up and leave the computer - even though thats when I want to trade most.
Always sticking to your rules and not trading when you are not 80% or better mentally - IS HARD TO DO - but I would fail otherwise.
There is a saying in poker I love: "We're here to play poker - not have fun". Some people can make money and have fun trading - not me.
"Be right and sit tight." - Jesse Livermore
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1. Congratulations! You are ahead of most traders, you got most of your money back.
2. It is hard enough to make money trading when you are confident and focused. Forcing yourself to trade when you aren't confident and focused is a quick way to empty your account.
3. You should be attached to your hard earned money. It didn't come easy. But if you are going to trade you have to be able to accept the fact that at some point you will lose some money.
4. You can pay a "Coach" , a Hypnotist, a Psychologist or a Hooker to get your "MoJo" back. (Actually all of them do the same thing ... the last one just isn't pretentious about what she does ) Or you can take a break from trading for a little while.
But whatever you do, DO NOT trade real money if you aren't confident you can follow your trading rules. Not only are you guaranteed to lose money, it is a Soul Numbing experience.
5. When I was younger I would have given you the "Cowboy up ... git back in the saddle speech". Luckily for you I have mellowed in my old age.
Unless trading is a full time occupation , and it doesn't sound like it is for you, there is no rule that says you can't take the summer off and sort out what you want to do.
Do research on things you think might make your system better. If you find your system works better without adding anything else, that knowledge may give you more confidence.
Go back and look at your past trading. Be honest with your self on what worked and what didn't. If the plan didn't work, work on your plan. If The plan worked and you didn't, work on you.
If your plan is solid, is there a part of it that you are uncomfortable with? Example: It requires lots of trades and you would rather trade less., it requires a large stop and you can't take the psychological hit of a big loss, it requires you to be in a trade for a long time and you would be more comfortable moving in and out for Quick Profits/Small losses.
No matter how good of a plan is, if it doesn't fit you ... it ain't going to work for you.
6. Only you can say when you are ready to trade again.
7. Many are called, few are chosen ..... The Gospel of Matthew Chapter 22 Verse 14 KJB
This above all: to thine own self be true ..... Hamlet Act 1, scene 3, Polonius is speaking
You can put your boots in the oven.... that don't make 'em bisquits.... Maybe this ain't your callin' in life ... The World According to ThatManfromTexas
I'm just a simple man trading a simple plan.
My daddy always said, "Every day above ground is a good day!"
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Firstly My original point stands. Undercapitalization puts retail traders is a position to go after too many trades and or too large of moves. Larger accounts are able to be much more selective about the trades they make (all the way down to none at all for the week or month) and they can also afford to chase much smaller and much higher probability moves. If you're trading CL and you're able to consistently make 1-2 ticks a day net, that's $20/day for a $5k account and $400/day for a $100k account. First ask yourself (or any crude futures trader) how difficult it is to yield 1-2 ticks/day. Now compare that to making 40 ticks/day (that's what a $5k account would need to yield in order to be equivalent).
Secondly, for the $5k account guy, each trade is leveraging his entire account, whereas the $100k account has the ability to scale in/out.
Thirdly, while the $5k account guy is hurting because there were no trade setups on Monday or Tuesday that would satisfy his 40 tick/day goal, the $100k account guy has MANY more opportunities because strategies for cherry picking a 1-5 tick move are numerous and plentiful. The $5k is pressured into making trades and he's also pressured into higher yields (in order to make an equivalent profit).
Fourth...the $5k account guy can get margined with one bad move/mistake.....the $100k account guy is afforded mistakes and has enough capital to weather mistakes and still be in the game.
As far as automation goes, you clearly have limited or no knowledge of what that means. I never told him to use a "bot." Actually writing code to quantify and memorialize entry criteria is helpful in numerous ways. It helps you to deliberately (in detail) determine what your criteria actually are. This leads to reproduceable results (rather than just random and blind luck). It also helps to build confidence, as it's consistent.....when you get a buy/sell alert, you know for sure that your criteria are met...no need to check and recheck and triple check to ensure that you're not missing something......that in turn reduces the effect of diminished opportunities. It also helps to prevent you from entering trades too late (because by the time you've satisfied your own fears, now you have to decide to enter the trend, which may have been reduced because of the delay).
Automation for alerts/signal entry doesn't have to be a rigid, automated execution, it can be there simply to aid his confidence and help him to enter trades timely and consistently.
Automation helps to reduce/eliminate the MOST emotional phase of trading, which is stop loss. Entry is stressful (especially after a losing string), taking profits is more stressful (wanting to get greedy and not leave money on the table) and stopping loss is the most stressful ("it'll come back my way....I know it, I just have to hang tough"). Automation helps to ensure that you're disciplined and stick to the plan. It helps to remove emotion and also helps to trade more consistently. It serves to establish a baseline/track record that you can measure your performance against (try measuring performance for a discretionary system...it's a difficult task).
I'm not advocating that he stick to a rigid dogma, but he asked for solutions to make him more confident. I've been exactly in his shoes (as have some of the auto guys I've learned from) and automation SIGNIFICANTLY helped me in terms of the emotion.
Again, the only other viable solution (other than simply adjusting your mindframe and telling yourself to be confident.....not an easy or viable solution most times) is to increase your capital to the point that the money is no longer significant to you. How do you think guys that make $100k/day trading instruments like Gold do it? They have massive accounts, that's how...so when they get burned for $60k, it's not a big deal and they're not gun shy the next day (which can be a profitable day because they're not fazed by failure).
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I am currently doing simulation. I did attempt to go live 3 times. However I lost money and went back to simulation. I did have the same issue when I first went live. I had a set $$ amount in my mind which I was ready to lose before I pulled the plug. When I was down about 80% of the amount during my first attempt, I decided not to have fear of pulling the trigger and irrespective of what happended, be reckless with the rest of the 20%. Needless to say that I lost the 20% but gave up my fear of pulling the trigger as well. No guarantees that it maynot return again but I did not reappear in next 2 attempts.
Hope this helps.
You can practise your skills all day long, but it's comparatively easy to get better at playing. The hard thing is to get better at winning--anonymous
Honestly I am surprised at the amount of feedback I've gotten in such a short time. I appreciate the opinions from more experienced traders. I agree that I think half the problem resides in the fact that my account is rather small. However, with my techniques it still shouldn't matter considering a loss of 10 consecutive trades still won't put me out of business. With how I have been trading If I do see something like two consecutive losses I will take the day off and Analyze what I did. But, on the other hand even losing more then 2% per trade is still kind of daunting. I guess its for the better because that early live trading determined the turning point for how I only trade prime setups and not just anything to pass the time.
I wish there were Micro emini indices similar to micro currency exchange accounts so I could trade more actively with Scaling proportion to probability with a small account. But, I guess thats a little redundant and it's fortunate enough that we have a mini version.
I guess I had to rehear the fact that not taking good trades is in essence a means of losing money. I just have to Bite the bullet and grin and bear the necessary risks to take. Since I sincerely trust in my methods nowadays I just need to take good trades and not get discouraged about the outcome. Because, Gradual long-term compounded gain Is the way. It would just be nice to trade money already made from trading rather then my wage from my previous job. Anywho, I appreciate the encouragement. If only I could trade with you guys in an Office environment I'd feel more compelled to compete. I fantasize someday that I could afford to rent office space and trade with some buddies all using our own money. Furthermore, I doubt I will give up trading at this point. I just see too much potential to give It up even if I did some how go bankrupt. I do truly love the art of trading and I think it has become a piece of me over time. I'd like to see where I can take it.
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