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@tigertrader If you are trading ES for max gain, one will have more risk with a higher percent profitable by mean reversion. You can get and 80% win rate and low risk by trend trading it, but you will not be taking many trades and likely struggle to pin point these entries.
Its always fun to ride the long waves, but the big boy will kill you in the rough spots. JMHO.
True, most trend following systems have average win rates because of high draw-downs during whipsaw periods. The fundamental problem of most trend-following systems is that in order to deliver a high payoff ratio they must sacrifice a high win rate. If you try to increase the fraction of winning trades, the payoff ratio will suffer. So in effect, you have to mitigate the negative effects of these problems by by combining a trend following strategy with a short-term trading system that would compensate for the negative trend following performance when markets are range-bound or mean-reverting. That's why you have to be able to switch gears, but first you have to be able recognize the trading environment you're operating in.
Everyone is giving plenty of advice here that you will likely find more confusing. You need to take more than a couple of steps back and do some real work on documentation. To find an edge you have to document all your trades on paper; not sim or live, just look at the right edge of a chart....pick an entry, a stop, and a target. (Each choice is independent of the other), then run the chart forward in time to see what the result was. This will allow you plenty of time to define your decisions in advance. Then write down why you made those choices and record the P/L stats, what went wrong and what was right. You need 100-300 trades with the same rules to be statistically significant and confident in your choices. If you can, put the rules and trades on spreadsheet to calculate an accurate p/l and ensure your rules work. If you change an entry and exit rule then redo another 100-300 "trades" to ensure your new rules work. This will take time but saves you money and builds consistency and confidence. You are now building a foundation of rules (ie system) that you can hold on to over time rather than just guessing.
I really like this system of resetting, finding your own Trading support and then building your system and rules. I’m going to employ this in my studies as a way of controlling my impulsiveness Buying too early, I ride price down then ride it back up. I usually end up with a smaller gain than could have been if I was able to wait for a lower support area to go long. I always end up with 75 percent less than I should have. Like buying Gold this morning at 1708, riding it down to 1701, then riding it back up and selling it at 1711. I could have bought it at 1700 or 1701 or or 02 which was institutional support and sold it at resistance which was around 1712-1714. Made this mistake two days in a row leaving 20 to 40 ticks on the table. This will help me cure this impulsive patience-less act which is an abomination. Thank you for this.
That's exactly it....also, you can't beat yourself up as you are never going to hit top to bottom perfection, "leaving money on the table" means you didn't take a loss on other trades that were profitable and you waited too long; consistency is more important than high per trade p/l, just be happy making a bit of money consistently, and once you're doing it's more fun as you look to the next opportunity as it's easy to scale up. The importance of execution cost vs. trade p/l is important, there is a balance between getting out too early even if it's profitable, and too late...the only reason retail day traders exist is because trade execution cost has dropped so much, but that spread cost can't be ignored either.
I agree......I wanted to make the "consistent" part to be more important in that statement, so often traders new and experienced can focus on the money, and that in itself can lead to other behavioral issues.
I developed a simple system, morphed together by different concepts that I found comfortable and understood. Somebody else may see it and go ..WTF..but that is part of trading, we all have a different set of lenses on.
It was not that I could not make money, it was I could not keep it, hence why I said I am not profitable, to be profitable means (to Me) you are consistent long term. What I am finding out about myself, is what has opened the door to that consistency.
Our behavior subconsciously with issues in our past come alive when we trade, more so in some than others, the way a person was raised and the experiences they had...developed their personality. It is why engineers and military men sometimes have an edge sometimes in trading.... let's face it discipline.... is a learned skill.....so is patience.......as humans we have issues......the more we can identify our own idiosyncrasies,(beliefs) the more we can repair our mindset...or so I believe, IMHO
Big names have shown up, and I dont feel I have much to offer next to them, so I will just say what I have ''learned'' so far in this last 14 months of studying...
What you are going through everyone has passed (or still passing). Have you learnt why markets move? Have you studied price action, volume profile, risk management, harmonic trading, chart patterns, etc or are you solely depending on indicators someone said it is good?
I am not saying any of these is the Holy Grail (actually I dont think there is one), but studying these will help you develop a “feeling’’ about what is going on.
One day in business school my teacher said: ''everything we want to learn has been probably written in a book, but your generation is too lazy to read and you want someone to show you the way.''
That’s why when I began to study the markets, I was willing to read books from the authors and not only watching youtube videos (that’s the problem with our generation, including myself).
If someone is teaching on youtube or charging for a course, you can probably learn from the author himself.
I would say, stop trading live, go back to the basics, learn first, try in demo account for some months your strategy and then get ready for the emotions when trading live.
Now, I will say what has helped me improve (not saying I am good, just better than before):
-I've read 3 books on Elliot Wave, the one I liked the most was from Frost and Pretcher.
I’ve read other books on technical analysis, but for me Elliot wave is what makes the most sense (I don’t know why).
-Read about trendlines, I really liked a book by Jeffrey Kennedy.
-I like Measured Moves (Al Brooks talks about it and there videos on youtube, what our generation like)
-Understand Volume Profile, there many books out there, and I really like FuturesTrader71's perspective. (And I watch his trader bite EVERY morning).
-A book that helped me a lot in the mental game was Trading in the Zone, by Mark Douglas, and I think every aspiring trader should read.
The best analogy for the markets in my head is: I have studied 5 years in a Brazilian Business School, spent around USD30.000 and when I finally finished, there was no job paying more than USD4.000/yr.
Still, I studied 5 years without receiving a penny for my future profession. If I study the markets for 5 years and get it right, my upside is ''unlimited''.
How long does an aspiring lawyer takes studying before he can practice law? Do I expect the markets to pay me in less than a year if I don’t even know how it operates?
For me, learning the markets is like learning a new language, I've spent over 10 years studying English, in my first year I could get by, but far from perfect.
In 2 years I could understand almost everyone, but specific terms used by lawyers, doctors, scientists and American RAP was just impossible (lol). In 3-5 years things got waaaaay easier and nowadays everything sounds easy (and I am still learning new things).
Today, FuturesTrader71 said he trades over 20 years and he still adapts now and then… So imagine me with 14 months?! I liked what @tigertrader wisely said, markets owes us nothing.
To summarize: Just don’t give up! Nothing is easy, but I believe it will be well worth it.
Touche...And so the journey begins with the understanding that nothing worthwhile is easy and it may take years to get to a level you want to be....but relative to other goals......why not!!... and along the way it improves your life...cherries on top...And that is a mindset worth having!!!
On we go....
At the outset thank you for posting. It takes a lot of courage to post something like this. What you are going through is quite common and I too have struggled and continue at times to struggle. My personal view about edge is that it is mental rather than having a system. Your edge, in my opinion comes from having discipline. Discipline in this case is a well-rehearsed plan at the beginning of every session or whatever time frame you chose to participate in. Under what circumstances and what areas will you engage in the market? How much you are willing and able to lose per trade to determine your sizing and stops? At what point do you stop trading. The only thing that allows you over a period of time to make money in this business is consistency – in approach. Tome that is your edge. The reality (IMHO) is that no one really has an edge from a perspective of having the “Holy Grail” when it comes to trading. Your chances of success on any given trade is 50/50. It is your discipline over a period of time which allows you to make money and perhaps improve your historical odds to 60/40 or whatever. Some succeed at even 30% or 40% because of strict risk mismanagement rules.
I guess what I am trying to say, is to take a step back. Create a routine for yourself and stick to it, to prevent the frustration of the market jerking you around. The market reaches its objective sometimes in mysterious ways and unless you have very deep pockets or are very experienced it is not easy to hold on to a losing position. Bottom line is you have to start thinking in terms of protecting your capital first and foremost. The rest will fall into place if you are disciplined. If you do not have the capital you cannot trade so focusing on the gains (FOMO) is inconsequential.
I aspire to think like you and come to a comfortable understanding like you. I am grateful for your insight. Everyday I discover brilliance and wisdom which allows me to appreciate this forum more than I could have expected. Thank you for taking the time to share your wisdom and insight into your psychology. I have benefited a lot. Consistency is important. Greed must be overcome. When the market shows you the money take it and say thank you. Don’t cry over what you left on the table. Be content. Tomorrow do it again. Thank you.
Touche...And so the journey begins with the understanding that nothing worthwhile is easy and it may take years to get to a level you want to be....but relative to other goals......why not!!... and along the way it improves your life...cherries on top...And that is a mindset worth having!!!