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How is it to be profitable?
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How is it to be profitable?

  #11 (permalink)
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... another variation of that analysis - with a basket of 10 times 400 trades each.

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  #12 (permalink)
Trading Apprentice
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MacroNinja View Post
It would seem like trying to trade DAX futures on a 50 Euro stop is incredibly hard to do given how relatively thin the market is and therefore how easy it is to move price 4 ticks with in minute, meaning you would just get chopped up with the noise. I would further point out, especially if your methodology is based on classic market profile theory that you should have different rules for different market conditions. Obviously you don't trade a breakout market the same way you trade range bound markets.

For my own draw downs, I came across an instructor that I didn't take a course from, but that had a great risk management metric I really liked. He said his minimum performance for the week was to be no worse than 0% (breakeven), and I think the reasoning was that this gave him some freedom in terms of the slightly bigger stops (than say you 5 tick stop) to really catch the right move that could go 50-200 ticks instead of day trading on 15-20 tick moves.

I am not too concerned about how many losses I've taken, assuming I am reading the market correctly. Now if I keep thinking and trading the market as range bound and it's trending..then I get concerned about because that's why any trade I've taken has probably been wrong. I would also say that my risk management system probably allows more than 10 trades in a row to be wrong (because size starts going down) before the weekly threshold becomes an issue. (Whereas in your case you feel increasingly more pressure with each losing trade because of the larger size chasing that "sensation" as you call it).

Think about it this way, let's say last week were you trying to be long the euro and you kept trading larger and larger as the EURUSD roughtly fell from 1.10 to 1.05. You probably wiped out a large part of your account with the size increase. But what if you kept getting smaller on each loss down to 1.05, and then when you started to be right again, you started adding more size.

If you want to get over technical on t he math, let's say you took one trade every day last week and you lost only 25 pips per trade. First trade loses 1% of the your account. Second loses .5%, then .25%, then .125%, etc.

Then this week, as price went from 1.05 to 1.08, let's say your average winning trade was 75 pips, and your trade size was.07%, then added in .125%, then added in .25%, .5%, 1%. What is your total return over two weeks? Aren't you net positive and even pretty happy with the performance especially if you ran a trailing stop instead of closing out the winners?


I should have said it before but I'm trading DAX CFD. So I may use mini-contract on it. I could have a 50US stop loss with 30 ticks for example. I usually take volatility in mind and I never use fixed stop loss.


What makes me upset is the fact I couldn't accept a loosing serie. I have to increase my positin size otherwise I wouldn't be able to trade seriously ever. I think you guys are traidng futures market so you're really in the game from the begining.

But for my concern I took trades with less than 0.3% of my capital and I would like to reach the 1% size before end of 2015.

I think I got angry not because I was losing more money than I've made (since my risk increased) but because I was scary to have a methodology which didn't work any more (but I got about 300 trades history so I should have be confident).

1) I know every method has a drawdown, a loosing streak.
2) methodoloy is not the main part of a succesful trading

But I failed despite knowing those 2 facts. Psychology is sth very interesting.


Quoting 
especially if you ran a trailing stop instead of closing out the winners?

Yes, definitely could be a good thing.

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  #13 (permalink)
Trading Apprentice
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tshunhu View Post
Your experience really sounds like mine, maybe many other traders~~

I was B/E around the last quarter of last year, covered all my losses since my beginnng of trading (almost one year). But then, I got more nervous and more focused on profit than my trading skill.

I was used to increase position and always wanted to cover losses during one day. I was not willing to accept a losing day, even placing a SIM trade can make me feel the fear of losing.

Personally, I think the major problem is from trading skill, but mixed with emotion weakness. When I was not sure about the direction of market, I still wanted to trade, because I wanted to be proven right, even just luckily. When I was holding a winning position I wanted to hold all my paper profit and always exited early. When I was holding a losing one, I hoped it turn back to B/E, when it does I hope a scalp profit. The emotion was and still is influencing my every decision during a trade. But the more experience I learned from my own trading and other's trading journal + books, the more confidence I have to stick to my original judgement.

Of course, the judgement could be wrong, I may still exit winning trade too early, or let my paper profit shrink, but the improvement is that --> this kinds of situation are much less influential to my emotion, because I know it would be the case when I made the decision.

I think the key is acceptance and keep learning, I'm still working on that myself.

Hope this helps. Bonne continuation et bonne chance!


Yes me too. Even sometimes I think market is about to break the support but I still wanna trade so I take a long position on it. But as I am systematic (manual) trader, I don't do that kind of mistakes very often.

But I realize that there are no superheros on the market. I thought that being successful trader means making money on almost every trade but it's more about following the rules and money managment strictly.


Last edited by Kwisatz; April 19th, 2015 at 07:45 AM.
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  #14 (permalink)
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Scalpingtrader View Post
It is important to again and again remind yourself of what can in terms of losing streaks, drawdown etc. etc.
Below something I built myself for that - I went ahead and adjusted it to your [target] metrics

50% winrate
1,6 profit factor
50$ stoploss per trade

see for yourself, if you have any questions on particular fields, feel free to ask!

P.S.: the probability of 7 losses in a row is .5^7 which is still ~ 1%, so even if you hadn't deviated from your plan (which I assume is playing a role in your streak as well) you still have a 1% chance of hitting that drawdown. For one event, 1% sounds small - but for an infinite number of events (assuming you don't stop trading suddenly) it becomes inevitable.

So know what can happen, decide how much "down" in % of your account you can stand IF it happens and start building your risk from there. In below example, if you might not want to lose more than 30% of your account in any given drawdown, you'd need approx. 3k for trading a 50$ stoploss.

Hope this helps...
ST

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Yes, you pointed sth good.


After having realized my big loss, I flipped a coin 400 times and I wrote the result (tail or head) on a paper each time. I got 46% tail after 400 flips. I understood that a system could have a "statistical anomaly" even with hundreds of trade. That's why I will keep trading and following my rules no matter what.



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thank you guys for your replies.

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  #15 (permalink)
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ScalpingTrader's excellent Montecarlo analysis shows why it's suicide to be increasing size as you're in a losing streak, especially a statically random one.

Looking at your P&L graph, I suspect you might well have been up 25-35% overall if the risk management system sized smaller instead of larger during a losing streak.

So if the issue is just one that is psych driven instead of math driven, think about it this way. A) For sure, if you're only managing your own money, you''ll never hit it big without the power of compounded returns on your side, and losing money is an absolute sin for the gospel of compounded returns. B) The risk management you just deployed will either get you fired at a prop firm or have your investors yank capital out of a fund. However, if you approached friends and family with a stead curve, even on a small account, you'd probably be able to get funded over time. Good traders are extremely rare and easily hired by prop firms or investors. So focus on the track record, and worry about absolute profits later.

Remember the classic tortoise and hare...

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  #16 (permalink)
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MacroNinja View Post
ScalpingTrader's excellent Montecarlo analysis shows why it's suicide to be increasing size as you're in a losing streak, especially a statically random one.

Looking at your P&L graph, I suspect you might well have been up 25-35% overall if the risk management system sized smaller instead of larger during a losing streak.

So if the issue is just one that is psych driven instead of math driven, think about it this way. A) For sure, if you're only managing your own money, you''ll never hit it big without the power of compounded returns on your side, and losing money is an absolute sin for the gospel of compounded returns. B) The risk management you just deployed will either get you fired at a prop firm or have your investors yank capital out of a fund. However, if you approached friends and family with a stead curve, even on a small account, you'd probably be able to get funded over time. Good traders are extremely rare and easily hired by prop firms or investors. So focus on the track record, and worry about absolute profits later.

Remember the classic tortoise and hare...


I understand what you say.

But I didn't increase my risk because I was loosing money. I increased because I have to increase it every 2 weeks in order to get closer of my goal.

Increasing risk is totally independent of the performance and it has to be. When I started the week with the new risk I didn't know I'm gonna take a drawdown. The reason of my failure is I was scary that my system doesn't work anymore and not really the money.

I had (still have) a misconception about being profitable : In my mind it means you're killer and you make money every week. Now I (have to) understand I'm gonna experience drawdown, difficult market conditions, etc. even if I have a good trading system.

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  #17 (permalink)
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Increasing your size after loses is exactly opposite of what the Kelly Criterion tells us to do.
I think that is a pretty typical mistake because cutting size after loses is not intuitive, feels wrong but it is absolutely correct.

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  #18 (permalink)
Novice
Hong Kong China
 
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Scalpingtrader View Post
... another variation of that analysis - with a basket of 10 times 400 trades each.

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Hey what software do you use to generate those results and good looking charts?

Maybe I'm not leaving, maybe I'm going home
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  #19 (permalink)
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a8d7e8 View Post
Hey what software do you use to generate those results and good looking charts?

Excel - It's just a bunch of formulas and their diagram function...

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  #20 (permalink)
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Kwisatz View Post
(Sorry for my English)

Well, I failed to resist at my first drawdown with the system...I have to work on myself. I have to understand that drawdown is part of the game.

How guys do you do to handle with that?

Thank you.


It's all perspective.....step away and see the bigger picture. Assuming your trading is sound and you're managing risk well, over time you'll see the trends of your own trading and get used to 'just another drawdown period" and also catch yourself when you're about to trade crappy.

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