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I'm absolutely devastated, don't know where I'm heading now
Recently watched a video from Rande Howell of TradersStateOfMind[com] and his version of the oft stated statistic was that within the first 3 - 5 yrs 95+% of people who attempt trading will disappear and never be heard from again having exhausted their financial and emotional resources. What I never realized until it came to me in this dream, was that the important take away from this statistic is that you cannot learn what you need to know to become a successful trader in only 5 yrs. If it were possible then the statistic would be very, very different. In part, what this is telling us and Oliver if he is still paying attention, is that it's statistically not realistic to expect success in your first 5 yrs. And if you want success, or to put it another way, if you want to learn what you need to know to be successful, at the barest minimum you have to stay with it longer than 5 yrs. How much longer? I think there was an .io poll that addressed this question. I don't recall the average response but wouldn't be surprised if that 5 yr figure was in there. Oliver stated that trading is all that he knows how to do. But, his situation tells us that he doesn't really know how to trade. He hasn't mastered risk management and doesn't appear to have the practical and psychological skills to deal with a sustained draw down. And, he's been at it for 5 yrs. He's still early in the learning curve. This is where the cliche "it's not how many times you get knocked down but how many times you get back up that matters" finds it relevance. My favorite expression that I use in my own life management is " disapointment is born from expectation". If because you are so smart and gifted you assume you can do this after a few months of serious effort then you are destined to have a rude awakening. If ( leaning on the survival rate statistic ) you realistically allow for at least 5 yrs of financial and emotional commitment to figure it out, then there a greater chance ( but not a guarantee) you won't be disappointed.
I think Oliver's only option now is to join one of these prop firms that funds traders. Two come to mind: https://www.earn2trade.com and https://www.topstep.com//. These seem to be legitimate firms. The buy-in is only a few hundred dollars (he said he was broke). If he succeeds in the initial test stages, he'll get a chance to trade the firm's money and keep a decent percentage of the profits. I think this is his lowest cost alternative.
...if he manages to find a firm where he can trade options. (The two you mentioned don't offer that.)
Of course he could switch to trading futures; however, then he would basically need to start his learning pretty much at "0" again, which makes it hard to become profitable enough to get funded anytime soon.
Meanwhile, his bills still need to be paid...
If he's really "broke", I think in all reality he will need to get used to the idea that he will probably need to find a "normal" job to pay the bills and save some money to maybe start another attempt making it in trading (considering the advice given here) at a later stage.
Of course not, only the big prop firms allow options trading and then only with a decent track record....which he doesn't have. He's going to have to learn to trade again with futures....or go back to an 8 to 5 job. He has few alternatives.....I think he knows that.
Making money should be fun. Someone told me. I respect that. However I think they are not related. I can understand the motivation or drive behind the work and maybe that person will make more money than most other people. However from my perspective trading is something I do without being judgmental about it. There are not many people like me and I know I belong to the .01% of the traders. Good luck.
Oliver's experience is a familiar one as it repeats over and over with new traders. It takes me back to the pre and post 1987 crash year. Prior to the crash I had been trading gold and biotech stocks and writing covered calls on them because of the available premiums. It was easy for a novice to make good money. Anyone could look like a genius. Along came October, and something changed, LOL an understatement if there ever was one. I stopped trading stocks and stuck to OEX options using a contrary method of buying calls and exiting long puts on the half hour as the index dropped into a classical support pivot. At the top of the hour the calls were exited and +.-5 to 10 minutes puts were acquired. In general it was the opposite of what the masses were doing and more like the servicing market makers were doing. Little did I, a retail trader, know what was really going on in the CBOE pits. At the time I was trading on an Apple Macintosh Plus running ProAnalyst software located in a kitchen closet. Data was from eSignal and later BMI and DTN. Fidelity Online Express was the broker. FOX utilized the RAES (retail automatic execution system). The little MAC+ 9 inch screen had 9 charts, PREM, McClellan Osc, TRIN, VIX, ZB, GC, SOX, NYSE Advance Decline line and a Vol AD line. I attempted program trading using the OEX. I still had a day job at the time so I would leave a VCR running while FNN(later CNBC) had guru after guru giving their two cents on the market. Those late 80's early 90's were good years to learn from TV. Now famous people like Bollinger, Murphy, Jim Yates of Options Strategy Spectrum, Robert Prechter of EW theory and many others were on frequently. Options and Futures conferences were held in Las Vegas and San Francisco several times a year. The education continued, with books, videos, seminars, conferences. Five years is just a beginning, too short to experience multiple full market cycles which repeat, but not exactly. Getting to the point. I believe it was around 1993-4 that options began trading on the NDX which was created in 1985. So I began trading NDX options because of the wide intraday swings on the NDX. For 3 to 6 months very good money could be made with them. Then "something happened." From then onward I could not make a dime in the NDX. I was puzzled, just like Oliver. Something had changed. I was determined to find out what it was. In the early 90's there was a publisher named Blue Page Publishing edited by Jerry Kopf. I think it was his firm or maybe Option Vue that held an options seminar in Las Vegas. One of the speakers was an elegant man named Ron Bruder(sp). He was a designated market maker in the CBOE pits. He and his programmer brother had been banned from the casinos because of their ability to card count. Next stop was the CBOE where they had multiple SUN workstations in their pit where they made markets in 5 or 6 stocks. The brother wrote a program to mimic a live market maker. The program automatically adjusted the bid ask spread based on a supply demand and volatility equation. Actually the core was the classic options pricing model, but with their added marketmaking insight from supply/demand. During a seminar break I had the good fortune to speak with Ron at the back of the room. He wore allegator leather shoes, had a gold nugget watch band and rings. He was dressed impeccably in a fine suit and tie. I told him my story of the NDX in hopes he had insight into what had changed. He went silent and thought pensively as though I had happened onto something I should not know....Or he was about to reveal a pit secret and violate an unspoken code of the floor. Then he began, "The NDX options were new. The pit was building a market in them. Spreads were kept narrow. They wanted and needed the public to be involved. The narrow premiums were also based on inadequate information. It took 6 months of real trading history to price them." Something about the RAES should be mentioned here as it may relate to Oliver's experience....if ETF options are traded on it or if it is even still used. I switched to futures in 2000 when futures could be traded like options without calling a broker. OK, so RAES software is calculatingly smarter than most traders. It sees data traders don't. It used to handle order sizes of up to 20 contracts. I don't know what it is now. But there was a time when I discovered the gamma effect during options expiration week and had multiples of 20 when I was trading an averaging system created by a now deceased publisher "RHM Warrant and Option Service." It was expiration Friday and I was dumping them as fast as I could in batches of 20. The price of the underlying was unchanged between my orders. BUT the option premiums were changing against me as though the RAES system knew, rather anticipated more orders. This was the first clue that I wasn't trading with a live body, it was a computer on the other side of the order. I was later told that large orders should be given to a live trader and not run through the RAESystem for better pricing. As for Oliver's September, more years of experience would show that is a time of dynamic change in a mature market. I had seen this behavior repeat so one day I asked a broker named Rick Rule from Torrey Pines Securities(precious metals, natural resources) why this annual trend of weakness into Sept and Oct occurred. His answer, "Beginning around the middle of August, mutual funds go on a buyers strike. They begin liquidating under performers and raise cash for cap gains and dividend distributions in the4th quarter. Market Makers are aware of this selling and only support prices to the degree mandated by the SEC to make a market. There has been some useful advice give to Oliver in many of the posts. If he reads and applies it and has the passion, he can succeed.
I know that I can only reply as to my own experiences. Of course, other people have different experiences - with excellent observations - perhaps different from my own.
The experiences that I will comment on were obtained with a great deal of pain.
I trade a combination of an Automated System, which I coded, and discretionary trading with certain indicators, some of which I coded. I am only an intermediate coder - nothing tremendously complicated- just a few different ideas. I use Multicharts64.
1. Oliver, consider automating your system which worked so well for several years. It is amazing what can be discovered with an automated system which can be optimized. It is difficult to compare different methods manually. Personally I optimize my system every time it takes a trade which I don't think was a good idea. The time frame between optimizations varies.
In addition, i may occasionally adjust an existing automated trade based on my discretionary observations of the indicators I use or the news. Using both methods in combination can be a bonus.
Others might say well your automated system is probably over optimized - perhaps - but it works. Who really cares what the market did two years ago? I care what it is doing now - over the last 35 days.
(It takes a few days for my indicators to be normalized).
I am having success at this time. My experience has been - If you optimize over a long period of time you will arrive at an averaged result - not the best result found on a shorter time frame.
Only time will tell - but the key is to have a discretionary system that works before you begin to automate. Otherwise, you will go broke having code developed - which fails. ( I have done this!)
2. I have observed that in the beginning I was not spending enough time analyzing various bar types and sizes. A method that fails on many bar types and sizes can be a big success if the right bar type and size is located. Given that a price bar chart is a fractal indicator - I personally use range bars for easier analysis of my system.
So consider exploring other bar types and sizes with your method. That may be all the change that is needed to be successful again.
Of course, the results will likely be more difficult to ascertain if the method is not automated.
I am not promoting this link - I have no affiliation, but to aid in analyzing a manual method, if you use MultiCharts or TradeStation and trade minute, daily, weekly or monthly bar charts - you may want to consider the following. https://markplex.com/easylanguage-programs/program-46-strategy-blueprint-planner/
This program allows you to place manual trades on a historical chart and get performance results.
I am a long time trader/investor. I have traded equities, options, futures and bonds. Have made and lost. On those occasions where I had significant losses, sometimes I lick my wounds and I step away from trading for a while. Had to. Clearing my head was necessary. Made money elsewhere outside of trading. When we are trading like a wounded animal we act erratically trading scared leads to one thing - poor decisions.
Whether a stock goes up or down has nothing to do with our opinions or what we want to happen unless you have Jeff Bezos capital to move a stock. We use technicals or signals to tell us to get long or short, but as we all know the markets don't care about our opinion. The problem with a trade (or many trades) going against a trader is that losses over the time wear us down and make us fearful instead of opportunistic traders. When we lose a wound is opened and it becomes impossible to make clear confident unbiased trades. Let me give you an example, when one loses money on a particular stock we often want to revenge trade against that stock, or make our money back in that particular stock. That might be a good or really bad decision. Maybe our time, energy or capital should be used elsewhere in another stock. This other stock is really where the best trade opportunity is and that is where we have the highest probability to make our money back. But as emotional human beings we often stay with the same stock because we have a grudge. But we should move onto better opportunities.
Here are some thoughts if your trading has not been working.
1) The markets are constantly changing - we need to as well.
2) Take a break. Clear your head. Disconnect from the highs and lows of trading. The markets will still be there when you are ready to step back in with lots of money making opportunities - long and short.
3) Stretch out your trading time frame. This helps reduce stress and may give you a greater opportunity to be right
4) Reduce leverage and trade small - yes you will make less $ but can lose less $ too - gets some wins and build confidence back up
5) Let the trade tell you that you are right or wrong. When I am in a trade I use this rule. If I get Long - I let the market confirm I am right. The long position should work pretty quickly and generate some profits. If I am short - again - I let the market confirm I am right. The Short position should work pretty quickly.
Good luck after taking a break slowly step back into the water...
