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Learning to trade through self discovery
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Learning to trade through self discovery

  #21 (permalink)
Elite Member
Washington DC
 
Futures Experience: Beginner
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Favorite Futures: 6E
 
Posts: 40 since Sep 2010
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My friend's trading was undisciplined and amateurish -- I had a talk with him about it this afternoon. It was more of an "intervention", and I told him that there were probably bigger problems at the root of it. He has managed to take what I believe was a large account and, through wild and undisciplined trading, shrink it by half or more.

Does anyone have suggestions on how to deal with a friend who displays this behavior? Gambler's Anonymous is not out of the question.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #22 (permalink)
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desert CA
 
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Sorry to hear about your friend's loss. Fine comment about Biden's motorcade. Here's a similar situation from supposedly a veteran. I used to be subscribed to a private forum "traders-secret-library". There was this "member" who worked out his own method based totally on divergences and what he called "positive divergences" what others would call "hidden divergences". He used nothing but line charts with 4hr, 1hr, 15min, 5 min etc. all propped up. I paid a one time fee to enter his private club webinar which he invited fellow members to join, and which he does about 2-4 times a month for a "marathon" , straight 14 hour trading overnight as he's based in Australia. Trading mainly the GBP/USD.

Well, he would have some good trades. Then on a loser, which initially entering and when turning south, then turning south more, he would average up, then do it again, then do it again. so like ending up with 5 average up orders all the while cursing and huffing. He advised us "students" not to do what he was doing. Well the session was over. Then the next session the week after, he said he had waited 12 hours more but it finally got back in the black! He had this spreadsheet which showed he always gained winners and was "steadily" building up his account. And he claimed success after trading this way for about 6 months and reached his profit goal, which was something like 45k or so. But after having been to more than few sessions where he did this crazy averaging up multiple orders on a badly south going trade, I'm inclined to believe this was all bunk and maybe he was getting a salary at the paid forum site, just like all the instructors there who hosted live 2 hour webinars while they said they could make 60 pips/ticks a day. And since then, I never look at divergences alone for a trade, only in support with other reasons/indicators. I could be wrong and that member trader always made back to breakeven with that crazy averaging up strategy, but it's way too crazy for me to ever trade. Might as well trade on a daily position instead.

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  #23 (permalink)
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I would agree. I haven't seen a method where consistently averaging down was profitable in the long term. There might be some people who do it successfully, but those folks must be few and far between.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #24 (permalink)
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dc618 View Post
"...... after seeing his trade today, I will forcefully and intentionally move myself further along this curve. I must do this and do it now because there's no way I could ever afford to lose one-third of my account value on a single trade."

At that moment, I decided something that I hope will become a major milestone in my trading journey. I will honor my rules.

Dreaming of the possibilities that a trading lifestyle might bring can be fun and entertaining. But the harsh realities of the risks are to be taken seriously. I once thought that trading could become my hobby. I now realize that trading should never be a hobby. Anything that involves this much risk is nothing to be trifled with. Several occupations involve levels of risk, but you don't hear of anyone being a "hobby firefighter, hobby hostage negotiator, or hobby missile silo operator. If a person is entrusted to do any of these jobs, he or she is a professional, someone who is trained to successfully execute a procedure in hostile conditions or environment.

Money is indeed a great motivator for changes in our trading, winning it and losing it. I think you've found a valuable gift in this experience. If your psychological makeup allows you to learn from another's mistakes then you are, IMO, further along this learning curve than you may give yourself credit for.

Honoring our rules is key. It's often said trading is a lonely business, I agree, just you and the price action,,,, no one else. If I can't trust myself to follow the rules I set forth, alone in the darkness of the early A.M., I'm doomed.

This last paragraph is probably the best paragraph I've ever read about trading, ever! If I wrote any more about it (your paragraph) I would fear minimizing the impact of your words.


dc618 View Post
I had a talk with him about it this afternoon. It was more of an "intervention", and I told him that there were probably bigger problems at the root of it.

A friend in need's a friend indeed. I believe your assessment of the "intervention" is absolutely correct, he is extremely fortunate to have you as a very close friend, and you him, as he displayed a willingness to honor your opinions. Having a trading buddy (or friend for that matter) bound by this level of trust and respect for each other is more valuable than any trading loss.


dc618 View Post
I haven't seen a method where consistently averaging down was profitable in the long term.

My intention is not to create a shit storm of controversy, so I'll try to choose my words wisely. As an example I'll use a long position, the reverse could be applied to a short position. I'm a technical trader, I trade a modest account which allows me to trade 4 6E contracts, rarely do I hold four positions, usually two. I have a system I've developed over the years and entries are based on the readings of several indicators. When my indicators signal a long position, it generates two numbers (price levels) where I place my limit orders to enter the market.

To keep this example simple, all my entries are dependent upon pullbacks into the range of the bar that when closed generated the signal to enter (signal bar). To clarify, assume a 15m bar with a range of 20 points (ticks) closes 5 pts off the high of the bar and generates a buy signal. At the open of the next 15m bar I have two entry points, the first entry point is at the Fibonacci 25% line of the signal bar, this would be 5 pts off the high of the signal bar. The second entry point is at the 50% Fibonacci retracement line or 10pts off the high of the signal bar.

This is an important note, and I hope it is unequivocally understood. When the entry signals are generated the price level for stop loss orders are also revealed, that price level is the low of the signal bar.

This is a simple explanation of a complicated subject, but three factors are addressed. One an entry signal, two a second entry signal (if adding to the position is desired) and three a hard stop if the trade fails. The hard stop, in relation to the entry/ies is the most important price level. In the example above if trading the 6E a trader would have 25pts of risk on this trade trading a two lot. As I said it's a complicated subject, an endless discussion of what ifs could arise, I'm not going there. I just wanted to walk the fine line between adding to a position at a more favorable price level, and averaging up/down. IMO, traders, all traders, must be absolutely comfortable with the total risk of every trade, no exceptions.

To close, I agree with your quote.

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  #25 (permalink)
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Cashish -- Thanks for the post! Your comments give me the sense that I might be on the right track in my trading education.

It's funny you mention the "averaging down" piece-- When I discussed it with my friend, said that he realized that the strategy is risky, but then said to me, "But you do it (average up/down) with your method, don't you?". I thought about it, and yes, in a way, I do average down. However, I do it with a strict stop that I don't move.

I'll explain the details of my trading methods in future posts. I only have two-- a breakout method and a reversal method. As for now, I've posted my chart from today.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #26 (permalink)
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Addressing another challenge

I looked over some trading statistics and I make a new realization: I'm overtrading.

I did a crude visual simulation using the last four weeks of charts and found that my system should provide about three trading setups per week. I've been taking closer to three per day, and most have been losers. I believe there might be correlation between the number of trades I take and the amount of ticks in the red.

I did better today writing down my trade setup rules, looking for setups, and passing on the ones that didn't fit my trade criteria.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #27 (permalink)
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Mid-month status

Over the first two weeks of August, I'm in the red:

8/1-8/4: +50 ticks
8/8-8/11: -68 ticks

30 trades, 12 winners, 18 losers


I really think I'm overtrading, because when I review older charts, hindsight tells me that I should have avoided many of the trades that I did. I never thought I was overtrading until this week, when I looked over some trade data to see an average of 4-5 trades per day. Given my trade plan and trading time window, I really should be taking about 1-2 trades per day.

A bar graph of the number of ticks per trade is attached.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #28 (permalink)
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dc618 View Post
I really think I'm overtrading

Some advice on helping determine if you are overtrading:

1. How many times did you re-enter the market very shortly after getting out, or getting stopped?
2. Of those times where you re-entered the market soon, were you trading in the same direction as the prior trade, or did you reverse?

Good job on the journal.



Mike

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  #29 (permalink)
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Big Mike View Post
1. How many times did you re-enter the market very shortly after getting out, or getting stopped?

I looked over some of my past trades and found that many times I indeed re-entered the market very shortly after getting stopped out. Is this a sign of revenge trading? I have observed that the days where I tend to re-enter soon after a stop-out tend to be larger losing days.


Big Mike View Post
2. Of those times where you re-entered the market soon, were you trading in the same direction as the prior trade, or did you reverse?

Almost always, I was trading in the same direction after re-entering. What does this typically indicate? Is this a flaw in my thinking? Is it some kind of hidden psychological need to be "right"?

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #30 (permalink)
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Sounds like you are not using stops properly, or you are just massively overtrading.

How do you calculate your stop? Why do you put your stop where you do?

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

Reply With Quote

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