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Had a tough time today. I noticed that price was not respecting my areas early in the session. Nothing in my rules states that I should not trade due to this observation. Should today cause me to second guess myself? I don't know.
Trade 1: Trend Continuation:
-My level for YM was much lower.
-Trend looked strong.
-Entry was good.
-Management was correct. Stop was hit.
Trade 2: Trend Continuation:
-Nothing to stop NQ per my analysis.
-Unfortunately my stop was hit before price achieved my target.
Trade 3: Trend Continuation
-Nothing to stop RTY per my analysis.
-Unfortunately price changed direction and stopped me out.
Trade 4: Trend Continuation
-This trade could have been avoided. The level was right beneath price so the potential risk:return sucked.
-I set my stop loss with a SELL not a BUY. I ended up shorting a second contract at highs thinking I had closed my trade.
-I notice my buying power is very low and check to see if I have any positions open and notice the -2 RTY.
-I panic and immediately close the trades at market for an additional unnecessary $100 loss. This was the right move, as I should not have been in the trade at this point. The only unfortunate aspect in hindsight is that as I type this RTY has hit my target!
-Count this trade as 0% adherence because I should not have entered and I definitely should have been more aware of my stop loss and not allowed that error to happen.
Results:
4 losses
-4R
ouch
Self Eval:
75% First three trades were good. Last one was not. 3/4 is not great but it't not horrible either.
Thoughts:
In dollar value, today was my largest loss ever. Despite this large loss, I feel no grief, sadness, or irritation. I believe this is an indication that I am slowly gaining control over my emotions and further detaching myself from my money. With all of that said, I wonder if there is some way I could have avoided these losses today. I DID notice that price was not respecting my analysis by half an hour into the session. I feel that conditions change rapidly and it has happened before that price does something I'm not expecting and then half an hour later does exactly what I forecast resulting in a profitable trade. I also feel that layering additional rules on my trade plan will distract me and give me more things to bear in mind when I should be just focusing on identifying valid setups per my rules. For now, I am going to continue trading the same way. Take every valid setup between 9:30 and 12:00 and then close the platform. There will be days like today where I have multiple consecutive losses, but there will also be days when I have multiple consecutive wins. I have a feeling intuitively, that the top 1% winning days will more than compensate for the bottom 1% losing days.
Please share your opinions on how you manage daily loss limits/# of trade limits or any other methods you use for damage control.
Hi Zimmer,
Sorry to hear about your day. No worries. We all get these days and not all admit. That was a good post and your trades were good. It's just a bad day at the office. I usually shut down my platform and even leave home office for few.
You did exactly right. It's possible that your rules have some issues, and that they don't take into account what happened today. But rethinking your rules on the fly while the market is running and you are trading is going to kill you. You can think about whether your rules need changing when you are not trading. While trading, you have more than enough to do just in staying with what you have already decided are your rules. Screwing with them at that time will just do you harm.
Aside from the one trade, which was a mistake, nothing more, you did perfectly fine today. If you think that what price did should make you revisit your rule-set, then do it after hours and when you have no performance pressure. If you conclude that your rules are OK, conclude that after hours too. During trading hours, only trade or decide not to trade. (You might want some sort of rule that tells you to stop trading if you make x amount of losses or if something else happens that tells you that you are barking up the wrong tree. But figure that out after hours too.)
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
There is certainly room for improvement in my rule set but I know that I need to actually execute the rules for an extended period of time to determine what the expectancy of the trade system is. Once I determine that, I can make small changes one at a a time and measure whether the adjustment improves performance or worsens it!
My loss limits go like this (you can adjust the percentages to match your own risk appetite):
Trade limit: 1% of account maximum risk per trade (even if more than one contract)
Session Pause Limit: 2% of account. At this amount of loss I must stop trading, evaluate every trade I've made so far and find out why I am not in sync with the market. If I discover the reason then I go back to trading. If I don't discover the reason I have to assume it is just a bad day and I am done for the session.
Session Quit Mandatory Limit: 3% of account. At this amount of loss I am done for the day, period. Then I still take every chart and every trade and go over it in detail to see if I can locate what the problem is so that I can come back tomorrow with renewed confidence.
Weekly Mandatory Stop: 5% of account. If I am so unfortunate as to hit this in a week, I am done until next week. Time not only to go over the charts and trades but maybe even to drag out some trading books for advice or encouragement.
I didn't come up with these rules myself. I picked them up from a course I took from Lance Beggs (yourtradingcoach.com). The only thing I have added is that sometimes alcohol may be involved in Steps 2 and beyond!
I'v just been through a couple of rough weeks myself. Besides using my rules, I also got encouragement, just as you have, by honestly posting my results in this community. I am only just getting started but obviously trading is a very tough business. We are dealing with the laws of probability and they say that losses will be encountered or else the math doesn't work. It's one thing to accept that intellectually, but when you take several big hits, the emotions still kick you in the gut. Hang in there, study your trades, tweak if necessary but don't throw out the baby with the bath water by totally giving up on your system unless you truly find a fatal flaw.
I like your rules, makes sense. A quick question, please. I heard many talk about Lance's course. Did it really help you? Do you recommend. I have taken few PA/VSA/market structure courses over the years.
Man, this is exactly what I was hoping someone would share. I never thought of this and now feel like I should have!
I risk approx the same amount on each trade. I think checking in to figure out why I am not having positive results after two losing trades makes a lot of sense. If I did that today I would have realized that my analysis was off today or the market was just not respecting my analysis. Either way, I would have then decided to quit for the day.
I think I will implement that rule for now as a damage control measure.
I'll preface my recommendation of Lance's course with this: I think a course has to "resonate" with the student. By that I simply mean that's it's more than just the content, you have feel in sync with the course and instructors attitude, outlook and overall personality. That said, I resonated with Lance's course and highly recommend it. Other people might take the course and not be impressed. As the old saying goes, your mileage may vary.
I had already read Brooks and Nison and Trading in the Zone and Lefevre and so forth. I had viewed dozens of free YouTube videos on trading and even paid small sums for a few video courses. I say that only because I think if Lance's course had been the very first thing I studied I probably wouldn't have gotten as much out of it. It's not that it is such an advanced course, it's just that some of the concepts make a lot more sense if you've already been trading and studying.
He does go from the basics of the markets, how to set up a screen, money management, reading the charts and so forth before he ever gets into setups and trading them. He has a unique outlook on candlesticks that I found refreshing because it offers a short-cut in how to view them. He then has about 6 or 7 setups that he trades and explains exactly how he does it. He is very much a discretionary price action trader. The course itself is not short and unless you sit down and go through it non-stop, you'll probably spend a couple weeks on it.
There is an add-on to his course that explains his scalping method. I paid for that as well, but I have not really pursued that method. I tried it a bit and found I was not comfortable with the rhythm or pace of scalping so I can't comment on how successful his scalping method might be if I actually applied myself.
The total cost was quite modest compared to many of the big bucks day trading courses out there. I don't have the exact number in front of me but I think it was around $400.
I should also mention that he is quite responsive if you have a question. I questioned which markets he actually traded and it turns out that his markets have changed a bit from when he wrote the course although that didn't change his methodology. Anyway, he was very quick to respond with an answer that more than addressed the questions I had.
Lance is an ex-military helicopter pilot from Australia and his methods reflect that. He is big on documentation, step-by-step checklists and accountability and I found that interesting as well. As with all courses, books, etc, I practice much of what I learned and have used other parts of the course to evolve additional strategies. I think that's probably true of most people, unless of course you are learning a mechanical system.
As a final thought, it's important to know that I am not an "affiliate" of yourtradingcoach.com, don't get a dime if anyone happens to sign up. I simply found the course well worth the money and have no hesitation recommending it.
It's important to understand that it might not be just two losing trades. Yes, if you hit two maximum losses, you've hit the limit. But you could have a loser, a winner and three losers before you find yourself staring a a cumulative loss of 2%. That's when the Session Pause kicks in.
I have found it helpful and hope you will too. It is important to have some system that guarantees that no matter how bad today goes, you must be able to survive so that you can show up tomorrow morning and start all over again.
