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

  #1 (permalink)
Trading Apprentice
Lyon, France
 
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How is it to be profitable?

(Sorry for my English)


Hi guys. I've been trading for 2 years now. My results so far are: -800 US. I keep studying a lot and I'm a breakeven trader since september 2014. Not able to make profit in a consistent way but not losing money.

Well actually I was in profit since November 2014 but Wednesday April 15 (last week) I just lost all the profit I've made in more than 5 months. It's not a big deal because I'm trading the FX spot market with very little size-contract.

I developped a method using market profile references and I was a killer since 23 january. My winrate was (I should say "is" because I will keep using this method) about 50% and my profit factor was about 1.6. It was good.

Two weeks ago I got a little loosing week from a statistical POV. I was little upset because I increased the size of my risk. (I increase my risk every week or two weeks, it's part of the plan). But I know I can't make money every day or week.


Last week, damn, I got the feeling my method wasn't working anymore. I took like 5 losing trades in a row. Then Wednesday morning I opened short trade on DAX (I respected my rules) and it was a losing one. I just start overtrading and tried to fade the trend to recover the money and this is how I lost all the I've made in one week.

I know I'm really stupid. I know that over 200 or 300 hundreds trade I'll have some really bad streaks but yet I couldn't handle it unfortunately.

I know that I can be successful. Over my ourney on forums, twitters, I got bad thinking like being successful means to make profit every day or week. You know, as "traders" tend to show only their good trades.

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.


Last edited by Kwisatz; April 18th, 2015 at 07:42 PM.
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  #2 (permalink)
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  #3 (permalink)
Trading Apprentice
Lyon, France
 
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I really want to show the picture of my performance so you can get how stupid I was but I can't post link or pictures yet.


heberger-image.fr/images/62238_2.png.html

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  #4 (permalink)
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You just got to keep on working at it.

One thing that can be really hard to do as a trader is stop trading when you know you're wrong. For me, this means after every loss I wait for the market to reshape and some time to go by. This ensures I don't get pissed off and it also lets the market settle. I noticed after much testing that most of my draw-downs occur in a small series of over trading on a seemingly chaotic market session.

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  #5 (permalink)
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@ Kwisatz,

Why were you increasing size as the method hit a rough patch? Why were you not decreasing size? It seems like from a statistical aspect, if you do you a quantifiable edge in the market, you're greatest issue is not running into a rough patch of randomness while getting to the long term positive expected value that law of large numbers will bring you. By increasing size you may have increased the payoff if you are right, but you have shortened the runway for how long you can last if randomness still goes against you.

Finally, maybe market conditions have changed? And your method was not applicable to the market environment in April? I'm not sure which markets you trade, but you mentioned the DAX, so just looking at the DAX, it looks like you could categorize with more directional movements without the same range bound classic market profile definitions.

PS Hitting breakeven from losing consistently is actually a huge milestone in the right direction. I'm sure if you right yourself and steady yourself back emotionally, you'll be profitable again.

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  #6 (permalink)
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Itchymoku View Post
You just got to keep on working at it.

One thing that can be really hard to do as a trader is stop trading when you know you're wrong. For me, this means after every loss I wait for the market to reshape and some time to go by. This ensures I don't get pissed off and it also lets the market settle. I noticed after much testing that most of my draw-downs occur in a small series of over trading on a seemingly chaotic market session.



You're exactly right. By the way I took some trades against my rules because I was upset,



Quoting 
Why were you increasing size as the method hit a rough patch? Why were you not decreasing size? It seems like from a statistical aspect, if you do you a quantifiable edge in the market, you're greatest issue is not running into a rough patch of randomness while getting to the long term positive expected value that law of large numbers will bring you. By increasing size you may have increased the payoff if you are right, but you have shortened the runway for how long you can last if randomness still goes against you.

Well, I increase size to get more sensation. My goal is to be able to trade with a 50 dollar stop loss at the end of 2015. I took a loosing streak when I increase my SL valu, so it basically reduces my profit in a significant way. It was a little hard to accept the fact that I got the drawdown the day where I increase size. But markets are not supposed to be kind I guess.



Quoting 
Finally, maybe market conditions have changed? And your method was not applicable to the market environment in April? I'm not sure which markets you trade, but you mentioned the DAX, so just looking at the DAX, it looks like you could categorize with more directional movements without the same range bound classic market profile definitions.

I trade EURUSD GBPUSD and DAX. Yes, you're right. Market conditions have definitely changed. I couldn't accept it. I should have keep trading and following my rules and money managment no matter what.



Quoting 
PS Hitting breakeven from losing consistently is actually a huge milestone in the right direction. I'm sure if you right yourself and steady yourself back emotionally, you'll be profitable again.

Yea, I should definitely be confident about.

Thank you both for your answers.

Could you guys talk about your drawdowns? Like what's your loosing streak record?

I experienced 7 loosing trades in a row.

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  #7 (permalink)
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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?

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  #8 (permalink)
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Don't widen your stop loss without widening your profit targets as well. Also, never break your rules. This is the biggest thing I struggle with, and every time I break my rules, I make a loss bigger than it was, or I exit early and leave a ton of money on the table that makes my losses take bigger relative chunks from my account. When you get pissed off or scared, never trade on it - never break the rules. Go clear your head and see if you can find another opportunity when you are there. I've taken to asking myself "the market is there - are you?" I never make any money if I (the Andrew that thinks like a good trader) am not there.

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


Hi guys. I've been trading for 2 years now. My results so far are: -800 US. I keep studying a lot and I'm a breakeven trader since september 2014. Not able to make profit in a consistent way but not losing money.

Well actually I was in profit since November 2014 but Wednesday April 15 (last week) I just lost all the profit I've made in more than 5 months. It's not a big deal because I'm trading the FX spot market with very little size-contract.

I developped a method using market profile references and I was a killer since 23 january. My winrate was (I should say "is" because I will keep using this method) about 50% and my profit factor was about 1.6. It was good.

Two weeks ago I got a little loosing week from a statistical POV. I was little upset because I increased the size of my risk. (I increase my risk every week or two weeks, it's part of the plan). But I know I can't make money every day or week.


Last week, damn, I got the feeling my method wasn't working anymore. I took like 5 losing trades in a row. Then Wednesday morning I opened short trade on DAX (I respected my rules) and it was a losing one. I just start overtrading and tried to fade the trend to recover the money and this is how I lost all the I've made in one week.

I know I'm really stupid. I know that over 200 or 300 hundreds trade I'll have some really bad streaks but yet I couldn't handle it unfortunately.

I know that I can be successful. Over my ourney on forums, twitters, I got bad thinking like being successful means to make profit every day or week. You know, as "traders" tend to show only their good trades.

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.


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!

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  #10 (permalink)
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Long Term Variance due to Randomness


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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