I trade a small basket of stocks holding concentrated positions with each position having a protective put in place. So how did I deal with the reversal day? Left work at 18h00 my time (2.5 hours into the trading day) and spent time with my family. Checked my portfolio balance at day-end. Took a knock just north of 0.6% for the day, but it is all part of the plan. Will close those positions where the put options expire later this week. If things stay where they are now, those positions will be slightly profitable. If all hell breaks loose, those positions will cost the portfolio about 4%.
By changing my trading from a shoot-from-the-hip approach to a more chess-like approach with lots of time to plan for different scenarios, I adapted my trading to something that works for me and makes decent money when markets trend. Lately markets don't trend that nicely, so I am happy breaking even until things change.
If I was trading a 1 trade-a-day system as the example I gave earlier, I either would have been stopped out (long hitting stop or short hitting stop) or the short would have worked (stop not hit). Since this is a hypothetical system to illustrate how trade management can impact the profitable of a system, I can't say what would have happened. However, no matter which way it went, it is all part of the game.
I tend to agree with @mattz - if your business is profitable and has the capability to expand, rather focus on that. If trading influences your business negatively, the price will be a lot more than just your trading account.
Last edited by grausch; October 14th, 2015 at 03:41 AM.
Reason: Fixed loss to agree to IB's numbers
The following 4 users say Thank You to grausch for this post:
Ok I understand now I thought You were long term daytrading as You suggested me.
Nice, the important thing is that You found what works for You, I see most people will tell You their method is the way to go (out of good intentions I know) but everyone is different as the saying goes "There are as many systems as there are traders in the markets" I don't think there are wrong or right systems/methods if it works for You it works for You period.
The following user says Thank You to Papertrade for this post:
No, I was trying to illustrate how different trade durations and number of trades can affect the outcome of a system over the long run. If you want, you can try and keep tabs of this system. For instance, you could journal how such a system would work and compare it to your actual trading - use a day-planner, write down your first trade of the day, give the stop a little more wiggle-room and end of the day, check to see what would have happened. Keep a running tally for a month or so and compare it to your actual results. You can also run some expectancy calculations and see the difference between the two system. It may, or may not, show some interesting results.
Yes, I started off day-trading the ALSI (south-african index futures) on sim as a university student. I always used to believe that the best way to trade was to become really "good" at it, monitor the market like a hawk and catch every small move while controlling risk with small stops - it makes sense massive leverage, but little risk should lead to huge returns, right? I obtained better results by changing my perspective and that change in perspective allowed me to look at other methods until I finally molded those methods into something that works for me.
It may sound like I was prescribing how you should trade - that was not the intention. Rather, I would suggest looking at your current trades and seeing how the differences I mention above can influence your account. Really critical post-analysis is crucial - not in the sense of getting better entries / exits, but figuring out out to get more out of a trade once you are in it.
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I did open a TOS Sim trial account to swing trade the ES just to get a feel if I'm in tune with the markets, did a couple of ok trades, but now I don't even open the software as it distracts me, when I'm more relaxed daytrading I might just do that, take a longer term position on sim as I keep doing what I do and compare both daily/weekly/monthly as I journal.
Basically I Buy/Sell pullbacks within the trend ..the mother of all simplicity and reliability.. right? Well this week I was like "is it a pullback or reversal? When my research and sim trading thought me not to question and just take the trade.
That's your problem right there! You've lost the bigger picture!
If you trade in a range or cogestive area the trade needs lots of room or better yet don't even get in...