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Rebuild confidence
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Rebuild confidence

  #1 (permalink)
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Rebuild confidence

How do I rebuild confidence? Suffered huge losses for the past year due to lack of discipline, switching between different trading methods and biggest losses were by trying to get my money back and losing several times more my daily limit loss.
Now back to sim, all mistakes are corrected , winning trades 30 days in a row , not 1 losing day.
Very simple and profitable winning method.
Currently working on finding even better entry point with smaller stop loss.
But how do I rebuild my confidence back to replenish my account and go back to live trading?
Any help or suggestions is greatly appreciated?
Thanks

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  #3 (permalink)
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ness1g View Post
How do I rebuild confidence? Suffered huge losses for the past year due to lack of discipline, switching between different trading methods and biggest losses were by trying to get my money back and losing several times more my daily limit loss.
Now back to sim, all mistakes are corrected , winning trades 30 days in a row , not 1 losing day.
Very simple and profitable winning method.
Currently working on finding even better entry point with smaller stop loss.
But how do I rebuild my confidence back to replenish my account and go back to live trading?
Any help or suggestions is greatly appreciated?
Thanks

In basketball, when a good shooter goes into a shooting slump, they start taking higher percentage shots, closer to the rim, or with fewer acrobatics involved, or driving to the rim to draw a foul to get a chance to make easy free throws. In other words, they stop shooting low-percentage threes and take simpler, higher-percentage approaches to shot-making. As they find success their confidence strengthens, their muscle memory starts to get into a rhythm and they start to remember how it feels like to be a winner again.

I would say the same goes for trading. You went back to SIM. That's good, but it's a facade. You need to start trading real money again, but really small positions. Some would say take higher percentage trades, like scalps, or selling OTM options, etc, but higher percentage trades doesn't always mean positive expectancy, so I somewhat disagree with that advice. What I think you need to do is to get to the strategy that is ultimately the strategy you want to be trading long-term, not change strategies. You just need to trade much smaller. If you're out of money then you just have to make more money, sell some things, cut your monthly expenses, do whatever it takes to get money to be back in the game, except don't take any cash advances on a credit card please.

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Excellent advice shodson !

As a general rule in trading, consistency builds confidence, but it takes time. You have to prove to yourself it is safe to trade live again. From your description you have proven out a method that should work for you. Also, it sounds like your problem was related to controlling your risk.

Consider starting as small as possible as you mix in some live with the sim trades at first. Make sure you have a daily maximum $ loss limit in place that you 100% abide by. You have to be able to turn off the computer and walk away if / when you hit it. Come back the next day and try again. If you cannot do that (control your risk 100% of the time) then you're going to be stuck on a permanent rinse and repeat cycle.

Be Patient and Trade Smart
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Quoting 
switching between different trading methods and biggest losses were by trying to get my money back and losing several times more my daily limit loss.

Do you have a mechanical strategy that you are trading (i.e., a trading strategy that has concrete rules with appropriate risk management parameters) or are you trading on a discretionary basis?

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trading

discretionary basis, I use Hybrid Renko bars multiple charts and Macd BB .
That's all

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Trading

My Friend Ness1g

" Now back to sim, all mistakes are corrected , winning trades 30 days in a row , not 1 losing day.
Very simple and profitable winning method.
Currently working on finding even better entry point with smaller stop loss."

and you still want better entry point with smaller stop loss? Does this mean you are getting 1% a day on your capital? 20% a month. I know it's in SIM but even then it does not add up. I have a feeling that you may be focusing on wrong things, a.ka. all gains without risk. Maybe following from Brett will put things in perspective.

" I strongly recommend reading the research study of speculator skill from Barber, Lee, Liu, and Odean. They studied the returns of daytraders over a 15-year period, the largest sample I am aware of in such a study. Their study is also unique in that it looks at the ability of traders to make money in a second year after having made money in the first.

The authors conclude that "there is clear performance persistence." The very top traders who make money net of fees tend to continue to make money going forward. The traders who lose money tend to continue losing money.

Here is the most important conclusion, however:

"In the average year, 360,000 individuals engage in day trading. While about 13% earn profits net of fees in the typical year, the results of our analysis suggest that less than 1% of day traders (less than 1,000 out of 360,000) are able to outperform consistently." (p. 15).

In other words, 87% of day traders in a given year lose money after fees are taken into account. About .28%--one in 360--is able to make money after fees year over year.

To be sure, that small group of very successful day traders earns a significant return. After expenses, they average +28 bps per day. Compare that to the 350,000 out of 360,000 daytraders who average a daily loss of 5.7 bps per day after expenses.

The authors conclude that day trading skill genuinely exists. They also conclude that it is very, very rare.

Further Reading: Can Day Traders Be Successful?


Many gems can be taken out of above mentioned study. The one i am focued on is that successful traders after expenses average +28 bps per day. This means they have to have properly funded accounts to live off +28 bps.
In summary if your account is properly funded keep above stats in mind and do not worry so much about 30 winning days and not 1 lossing day plus still trying to find better entry points with smaller stop loss. Let me put another way. I give you $100,000 to trade with expectation of 12% annual return ( majority of so called SMART MONEY will be very hesitant to take my money as they can not deliver 12% annual return on a consistent basis without aggressive risk profile of the investor). That's 12K/year or $1000/month. How would you trade? Would you trade every day? I doubt it. You do not need to. You will wait for the best set up etc. You only need to trade 1 or 2 contracts of crude oil per position to generate expected return. Problem is no one trading for a living can survive on $12K/year income. This is where problem comes in. Even though traders can generate excellent returns but they need more than excellent returns. They need PIE IN THE SKY returns and thats where things break down.

What do we see in actual practice? Pie in the sky returns expectation on a shoe string trading capital. I hope you being a very successful businessman are aware of expected return, risk and trading capital equation. Focus on this equation and everything will be fine.


NOTE: In my own trading that's all i am focused on 12-20% annual return without any leverage. My first trading account was $50k. I looked at rate of returns from hedge funds to best money mangers and they were somewhere between 17 to 27% per year on a consistent basis. 17% on 50K turns out to be $8500/year. If i was smart enough i would have come back to trading with significantly more capital. But i decided to carry on in the name of perfect entries, stop loss, discipline and on and on. Lost it all and then more in subsequent 3 accounts all in the name of risk mangement etc. I would make 15-25% on my equity but who can live off $10K/year? so i will push the edge and back to zero. It took me a while to realize the risk, return and trading capital equation. No amount of discipline, entries, stop loss or any thing else under the sun will or can change risk, return and trading capital equation.



My posts are not meant to give financial advice neither do they imply that my method is special. "THIS IS WHAT I COULD BE IF I HAD A TOTALLY CARE FREE STATE OF MIND DURING TRADING" Mark Douglas.

Last edited by mfbreakout; December 23rd, 2014 at 06:07 PM.
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  #8 (permalink)
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1%

Were do you fit?
Are you among the rare 1%?
I like to know

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  #9 (permalink)
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rebuild confidence


mfbreakout View Post
My Friend Ness1g

" Now back to sim, all mistakes are corrected , winning trades 30 days in a row , not 1 losing day.
Very simple and profitable winning method.
Currently working on finding even better entry point with smaller stop loss."

and you still want better entry point with smaller stop loss? Does this mean you are getting 1% a day on your capital? 20% a month. I know it's in SIM but even then it does not add up. I have a feeling that you may be focusing on wrong things, a.ka. all gains without risk. Maybe following from Brett will put things in perspective.

" I strongly recommend reading the research study of speculator skill from Barber, Lee, Liu, and Odean. They studied the returns of daytraders over a 15-year period, the largest sample I am aware of in such a study. Their study is also unique in that it looks at the ability of traders to make money in a second year after having made money in the first.

The authors conclude that "there is clear performance persistence." The very top traders who make money net of fees tend to continue to make money going forward. The traders who lose money tend to continue losing money.

Here is the most important conclusion, however:

"In the average year, 360,000 individuals engage in day trading. While about 13% earn profits net of fees in the typical year, the results of our analysis suggest that less than 1% of day traders (less than 1,000 out of 360,000) are able to outperform consistently." (p. 15).

In other words, 87% of day traders in a given year lose money after fees are taken into account. About .28%--one in 360--is able to make money after fees year over year.

To be sure, that small group of very successful day traders earns a significant return. After expenses, they average +28 bps per day. Compare that to the 350,000 out of 360,000 daytraders who average a daily loss of 5.7 bps per day after expenses.

The authors conclude that day trading skill genuinely exists. They also conclude that it is very, very rare.

Further Reading: Can Day Traders Be Successful?


Many gems can be taken out of above mentioned study. The one i am focued on is that successful traders after expenses average +28 bps per day. This means they have to have properly funded accounts to live off +28 bps.
In summary if your account is properly funded keep above stats in mind and do not worry so much about 30 winning days and not 1 lossing day plus still trying to find better entry points with smaller stop loss. Let me put another way. I give you $100,000 to trade with expectation of 12% annual return ( majority of so called SMART MONEY will be very hesitant to take my money as they can not deliver 12% annual return on a consistent basis without aggressive risk profile of the investor). That's 12K/year or $1000/month. How would you trade? Would you trade every day? I doubt it. You do not need to. You will wait for the best set up etc. You only need to trade 1 or 2 contracts of crude oil per position to generate expected return. Problem is no one trading for a living can survive on $12/year income. This is where problem comes in. Even though traders can generate excellent returns but they need more than excellent returns. They need PIE IN THE SKY returns and thats where things break down.

What do we see in actual practice? Pie in the sky returns expectation on a shoe string trading capital. I hope you being a very successful businessman are aware of expected return, risk and trading capital equation. Focus on this equation and everything will be fine.


NOTE: In my own trading that's all i am focused on 12-20% annual return without any leverage. My first trading account was $50k. I looked at rate of returns from hedge funds to best money mangers and they were somewhere between 17 to 27% per year on a consistent basis. 17% on 50K turns out to be $8500/year. If i was smart enough i would have come back to trading with significantly more capital. But i decided to carry on in the name of perfect entries, stop loss, discipline and on and on. Lost it all and then more in subsequent 3 accounts all in the name of risk mangement etc. I would make 15-25% on my equity but who can live off $10K/year? so i will push the edge and back to zero. It took me a while to realize the risk, return and trading capital equation. No amount of discipline, entries, stop loss or any thing else under the sun will or can change risk, return and trading capital equation.


That should rebuild my confidence.
JK


Last edited by ness1g; December 23rd, 2014 at 05:24 PM.
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  #10 (permalink)
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As @mfbreakout mentioned: There are not so many surviving over time.

Having success over time in ANY business means:
Needs the right product (idea, marketing concept etc.) at the right time
ready for the market: if there is interest - the project may get wings...
otherwise the crash is programmed.
SO
a daytrader is swimming in the same pond as all other fish - aka traders.
Every Day.

GFIs1

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