I have never blown up an account to $0, or to some amount where I couldn't trade the minimum amount to cover margin, but I have had some big losses that made me think I needed to do something completely different or change course. One time included a margin call to cover some short naked FAZ options on March 6th, 2009, right near the bottom of the financial crisis bear market, and they were selling for something like 200% implied volatility. I covered them to liquidate the position and, of course, the market turned upward the next day or two and it would have been a huge winner. To make matters worse, I funded the trade with low-interest cash advances from credit cards. My trade and prediction was correct but my position size and risk management was whack. I was numb for weeks. I didn't mention it to my wife. Instead of trying to revenge my way back, I just took responsibility and decided I need to make some changes. And that's about when I discovered Ninjatrader, futures, and BigMike's blog, now futures.io (formerly BMT).
Last edited by shodson; April 20th, 2015 at 02:30 PM.
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actual the 38% with "NO" are something between liar or ignorant........
It is a matter of definition. If you loose more than ca. 30% of your trading capital in one or some trades, YOU HAVE blown up your account.
Btw. .....the understanding from instiutional investors.
If so, if you have a DD with 30%, something has happened what was not planned, .....means you ignored your own plan, means your investor will loose his trust in you. He will ask you why and you have to answer reasonable. If not sufficient he will draw his money.
If so, it is a important question if it could happen again, ......means you will ignore your plan again, means your investor will loose his trust in you. .....investor draw his money
If so, how much gain you need to get back in track? It drives you to increase your risk and leave your plan again. ...Investor donīt want to bear this risk and draw his money.
If so, it will last a long time, to much long, that you as a CTA will get again a performance fee, it is likely that you will loose your interest in working for nothing!...... your investors know this, and draw his money.
So.............. ahhhh you are not an institutional investor? It doesnīt belong to you? BULLSHIT!!!
TREAT YOURSELF, YOUR OWN MONEY LIKE YOU ARE AN INSTITUTIONAL INVESTOR!
...................otherwise donīt give yourself money to trade.
ask this question again with the add, that everything more than 30% loss is equal to have blown up your account :-)
The answer divides the one who are traders and the one who are not!
Traders = 100% otherwise they are still on the way on experiencing and trying.
The following user says Thank You to peteM for this post:
I agree 100%. I hate it when people recommend beginners to sim trade for months and months and months until they are "profitable". Honestly, sim trading serves the purpose of learning how to click around a damn trading platform, and after that, you better be playing the real game or your mind will not take the exercise seriously.
Who cares? Sim trading does nothing for real practice, which comes from putting real money on the line and learning skills WHILE building psychology.
Medical students are simply reading and studying, and the cadaver serves the purpose of learning gross anatomy. Medical residents in surgery, on the other hand, start their real learning at the live operating table under the guidance of seasoned surgeons. They don't learn real skills in the simulator, or in medical school. Residency training in surgery is real.
I did the real money on the line from day 1 and lost 8000 $ in 6 months
And what I learned :
- I dont know how to trade
- adding to the loser dont work
- hoping dont work
- picking tops and bottoms dont work.
- support / resistance must hold - no they dont
With sim first my learning costs to trade would have been only fraction of that.
The following 4 users say Thank You to lemons for this post:
Maybe but sim trading has value. Even Steen sees value sim as development tool.
Most in futures.io (formerly BMT) see sim has no or negative value.
I see I know that sim had big value in my development.
Heat me and call me shortsighted.
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First I lost $30k on stocks, back in the Dot Com era crash. I was an expert in "catching the falling knife".
My most memorable was TiVo, I made $8000 in 1 day! I did a little dance. I said out loud "Thanks, Money Tree!".
Next day is rebounded down $12k. Wash, rinse, repeat.
I would quit on and off, over the years. Thankfully, I was still sitting out over 9/11, so I missed that one.
Second blown account was during "Flash Crash". I had been having trouble with my discipline, and so installed Stop Loss orders on every single investment just days before...all gone, despite what would have been a flat day overall.
Third time was not really a full blow out, but I had switched to Options, writing covered calls and selling puts on stocks "I would be willing to buy anyway." Found out that writing options is taking on the role of Insurer, and sure enough, my good stocks were called away and I acquired one bad stock which proceeded to lose 75% of value. Quit again.
Recently acquired a mentor, who taught me Futures. He instilled a great sense of discipline in me. I wanted to start out small, just a baby $2500 account. Paper traded ES first to learn the ropes, then on to SIM. "Made good money" on SIM, so graduated to Live. I thought it was reasonable to risk 10% of the account per trade. Needed to lose 9 times in a row to fall below the day margin. Kept a trading log. Made it up to $4000 in 2 months trading. A 60% gain. My confidence grew. Discovered I was "Curve Fitting". Thought that was a good thing. Account now dormant at $1300 balance. My "method" had ceased to work, starting around Thanksgiving last fall.
Starting again, now with Ninja Trader. Much of my troubles could be attributed to "Trade Breakage", as I was entering trades by hand while working my Day job. My log records over $3000 in such manual slippage, as psychology would intrude on my planned entry/exit points. I re-created my old method in a Strategy, which back-tested well against my planned trades last year (not what I actually executed). Outside of futures.io (formerly BMT), I would hear a lot that successful traders back tested their systems. I still do not quite understand @Big Mike's dislike for backtesting. If you are trying to scalp, slippage would get you, but if you shoot for medium term swing trades, I have found that subsequent backtests reflect what I have seen in forward SIM testing.
My strategies always involve an active Profit Target and Stop Loss, in case of internet disconnect. I can move the Stop Loss in my favor, but Profit Target is fixed. My biggest fear is a runaway trade bankrupting my account while I cannot get online.
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I used SIM trading to get the statistics for my trading system when I was learning it. I kept detailed results on a spreadsheet over a 3 months period of time to calculate the win rate and expectancy. Learning the system and knowing the statistics of the system is an important part of psychology. It gives you the needed confidence so that one may learn to think in probabilities. How can you think in probabilities when you dont know the probability of your trading system ?.
True one may very well do this while trading live. I choose to learn and get the numbers using SIM and work on rest of the psychology once I started trading live few years back. It is still work in progress but I can honestly say trading thus far made me a better person , if not the best trader I can be , yet .
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