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The 22 Days: A Price Action Trader shares his Journey
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The 22 Days: A Price Action Trader shares his Journey

  #51 (permalink)
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iqgod View Post
GaryD THANK YOU.

Since his reply is as incisive as it is as honest, and as it gets to the roots of the problem I am taking the liberty of prodding GaryD a bit further, with an aim to discover a bit more of myself.

I am putting this post in the form of a conversation because role-play brings out emotions that might be otherwise lost in a wad of prose.

If ever My demon and GaryD have a one-to-one it would go something like this:


iqgod, I have to say that was very entertaining. Sorry for not following suit and writing the conversation I believe your "demon" would have with me. It might be fun, and I have laughed at myself for some of the comments I came up with, but too time consuming and does not accomplish anything.



Below are my comments where you requested and then some;


IQGodD: I doubt if I had a solid methodology defined all along. A bit of Al Brooks, a bit of James16 pinbars, and a bit of risk management and trade mangement. Maybe all of it works but I probably have selected too short a timeframe to allow me to execute the plan properly. Do you feel so too?

GaryD: (Let's leave this one for GaryD to actually answer, he may probably say that I need to first experiment with the setups on sim and be consistently profitable for every week for the next three months, which is what he said earlier)

Studying other traders methods is a good practice, it let's you look over another trader's shoulder and gain insight into what they do. But always remember, you are not them. For you to be successful you must learn how YOU trade profitably. There is no exact instruction manual out there. There are pieces of information, tools, that you learn, experiment with, tweak, use for awhile, then abandon. Over time you find one that resonates with you, and it finds a permanent home in your trading arsenal. And then you keep looking until you find another. You make them yours and you get to where you understand them better than anyone else does.



IQGodD: I have won a Forex contest on Sim. That was when I took my account to almost double in one month. But perhaps I just picked up bad trading habits from the contests. It may serve as proof that I have a good level of understanding of the markets, but under the current circumstances let's just say that I don't.

GaryD: Trading profitably where you are up for each week for three months will prove it to yourself.

No, trading profitably for 3 months is nothing more than a milestone. It proves nothing other than you had a 3 month period that you were profitable. The real purpose of having a goal of three months is to begin to shape your mind and your actions so that you can become profitable over the longer duration. You will prove that you are CAPABLE of doing it, but that is not where the works stops and easy street begins.



IQGodD: (still plagued with thought like - "But what about Larry R. Williams who made a gain of $1100000 (11376%) in a 12 month competition with real money in the 1987 World Cup Championship of Futures Trading from the Robbins Trading Company?" But not having the guts to say it out loud right now for the fear of a rebuttal.)

GaryD: (seems to realize what is going on in IQGodD's mind, looks sternly) Set your goal to being up 20% at the end of the next year. THAT is a sane goal for a beginning trader.

How much you are up at the end of the year is directly correlated to how well you can shape your behavior to do the right things and avoid the wrong things. If you can make 20% per year consistently, you are doing good, but don't limit your beliefs to that number. It is a mindset, that you are not here to make as much as possible, you are here to do the right things as often as possible. Forget the money, focus on being in control of yourself, your actions, your emotions.



IQGodD: Well, this method does seem to deliver exceptional results. I had backtested it a lot. I had tested it on many stocks and many futures on DAILY charts and it works say 60% - 70% of the time. I agree that the phone line way of scalping was dumb ass, but the same issues also cropped up when I was sitting at my terminal and execution was flawed for reasons such as slippage, bad discipline items such as not being fully prepared for the day, and on days where I was prepared and had a plan even then looking at too short a picture and glitches in following the plan because of the over-analysis (and also greed and boredom and feeling of being left behind at times).

GaryD: Be honest with yourself. Stop treating it like a game or a past-time. Get the necessary elements of discipline in place FIRST. Until you have proof that you are good do NOT commit real money.


I can show you strategies that backtest 90% accurate and fail horribly in real markets. Backtesting can be useful, but it is not everything.


I assume you want to trade live because you want to have more money. Ultimately, that is the reason we trade. Somehow we ignore the fact that trading before we are ready gives us less money. Every time you blow $1k on a trade you did not understand, you wasted a drawdown cushion on a method you do understand. Every loss counts for something. Even if you become very successful, you will need that money to absorb losing trades, commissions. Plus, if you ever want to scale up, you will need more capital to do that. By trading today, before you know that you are not a losing trader, you are throwing away your future potential. Making money is easier than keeping money. Stop wasting your chances by not having the patience to wait until you are better perpared.



IQGodD: I had earlier done the exact same thing that your advice recommends. I had taken a break from trading after I had lost 100% of my trading capital one day, had gone back to the study room and worked hard on studying setups, got evidence that 'this thing actually works' - however was so maimed and mauled (due to putting in real money and losing) that mental blocks stop me from taking those trades which have been proven by backtesting to be good places to initiate trades. Also exits are based on gut feel rather than any other parameters. Also, fine tuning some of the setups seems to make it work better - but then here I go deviating from my plan again.

GaryD: Hard silence.

No, I would say that the ONLY evidence that something works is when you simulated account balance proves it over months of practice. Enter wherever you want, exit wherever you want, see what works. It is not real money so you can't get hurt. That is what simulated trading is there for.



IQGodD: Do you feel that I should be on sim or should I reduce the account size to a 'Don't care' size to ensure that I smoothen out the execution part as well? (fumbling with orders, slippage) etc.?

GaryD: (he would be the best person to answer, I can't simulate the mind of an experienced trader)

It is apparent that the thought of not being allowed to trade live is pure torment to you. Why do you think that is, when you know you are losing money? Pilots train on flight simulators, the military has practice operations, golfers go to the driving range, in all organized sports they PRACTICE.



IQGodD: (promises himself to refine his plan with details, will follow his plan for the next three months.)

GaryD: Smiles.

Actually, that might be a smirk, because I'm not sure I believe you yet.




Let not the above conversational format make you think it is written in light or jest - it is not; it is as earnest as the posts that have preceded this one, except that the next three days of the journal will be paper traded and an Epilogue will follow in the footsteps of these discoveries, harsh or otherwise which will set me on the right path of being a TRADER, following on the footsteps of many great ones who have walked before me and marked it with their Milestones.


That paragraph above is pure demon talking, not some fictitious conversation. "I will solve all my problems in a few days", "I feel so much better now"... Trading sim for the next three days will not help you. Taking time off to re-think things might.

1) Forget about money, learn to trade.

2) Forget about money, learn yourself.

3) Forget about money. But, if you must think about money, think of what you are saving by not trading live and how much that will amount to over the next year. When you have saved enough to trade again with a decent account size, and when you have learned to have respect for that money, and when you have learned to control your risk and position sizes, and when you have truly earned the right to trade, then;

4) Forget about money, and trade.


Tell your demon it was a pleasure.


Last edited by GaryD; March 27th, 2012 at 11:18 PM.
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  #52 (permalink)
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No Stop Losses?

I feel your pain.
Thank you for writing what most don't have the guts to write.
Your solution is simple, not easy, but simple.
1. First and foremost, your account must be funded properly.
2. YOU MUST use stop losses, unless you like donating your house, car, marriage, etc to the market monster.
3. Learn the rules of Value Area, Pivots, VPOC, and make yourself a daily worksheet tracking all of it to give you the critical 3D view of the market.
4. Incorporate not just the what, the how, the why... but also the WHEN (time cycles tool)
5. Ignore the value of money, become a mathematical robot.
6. Have NO BIAS, Use auditory alerts allowing you to get up and take your eyes off the charts and do that, A LOT.
7. Back test and paper trade your pivots. Trust Them. Play the bounces taking notice of price behavior at the pivots.
8. NO BIAS + NO EGO = NO FEAR.
9. When your setup is triggered pull the trigger without hesitation.
10. DO NOT grab the quick buck and move your stoploss in too quickly.

LET YOUR PROFITS RUN (meaning, make the market prove that it's turning against you before pulling the plug)
CUT YOUR LOSSES SHORT (meaning, when the market turns against you, take the hit, do not make the market chase you.)

And finally, understand this.
HOPE IS NOT A TRADING STRATEGY.

Paper trade with all the seriousness of a live account.
DO NOT TRADE WITH MONEY UNTIL YOU MAKE PAPER MONEY
IF YOU "GET BORED" and restless paper trading, then this business is NOT for you. (yes it is a business).

Here are the rules I STILL TO THIS DAY have to read aloud before the first trade early every morning:
I hope they help you.
- I am involved in the market for one reason only... to systematically, consistently pull money from the market on a daily basis.
- I do not trade impulsively
- I am a conservative trader
- I only trade my established setups
- I always let the market come to me
- I have my limit and stop losses in place ahead of time
- I do not chase the market, EVER.
- After losing a trade, I step back, waiting a while to trade again, if at all
- After a large loss (yes, it happens) I cease all trading for the remainder of the session.
- I keep tight stop losses and DO NOT move the stop back when the market moves against me.
- I do not get frustrated
- I am a trading robot, I am Spock , I pride myself on being a creature of pure, unflappable logic.
- I control my emotion so that it does not control or influence me.
- I NEVER "Throw caution to the wind"
- I NEVER place overnight trades and look away
- I let my profits run, particularly following the PROVEN morning reversal.
- I trade as though I have 100 cars on all the time, regardless of how many I have in.
- I am perfectly content to exit the day with $50 - 100 profit per contract ($ES_F)
- My strongpoint is the 10am morning reversal.
- I DO NOT overtrade
- 95% of all the money I have lost was from overtrading or retreating a stop loss when losing.
- I NEVER trade if I am edgy or have butterflies (for whatever reason)
- I always eat a solid breakfast and NEVER drink coffee before entering the market.
- I seek out 7,8,9,or 10 ratings (out of 10) for trading environments (locations to trade, no distractions)
- I put a minimum of 1 hour research and number crunching before entering my first trade.
- After winning a good size trade, or any trade, I know that I AM NOT INDESTRUCTIBLE
- After winning, I only trade again if the trade is one of my established setups
- I am a student of the market and will continue to learn until my very last trade.
- Of the 22 or so trading days per month, I only trade approximately 15 of them.
- I am not in this to play games, for the thrill or the risk.
- This is NOT gambling, any more than buying or selling real estate is gambling.
- After losing a trade, I do not get frustrated or angry, as it is merely part of the process, much like accepting rejection as a commissioned salesperson.
- I proceed confidently, understanding that with the consistent, intelligent use of stop losses, this is NOT a dangerous endeavor.
- While in a winning trade, my method for letting my profits run is by sitting back and looking at the big picture after my stop loss is positioned to guarantee me a tiny profit.
- I behave as a HUGE Trader every day, in every trade, in order to become that HUGE Trader.
- I am vigilant for detecting sideways action and AVOID IT AT ALL COSTS.
- I understand that I must constantly adapt to what the market is doing.
- On Trending days I force myself to let profits ride. On smaller days I take what I can get, never hoping for more.
- If I miss my entry point (for whatever reason) I simply wait patiently for a retracement or a pull back and execute an intelligent market entry, rather than foolishly chase the market.
- I never have or share disbelief of behavior or price level in the market because robots do not emote.
- I never let the size of my account interfere with my rules.
- I am watchful for sideways action and understand that there may be no 10am reversal on this day.
- I occupy myself with other tasks while trading, understanding that staring at the charts = LOSING.
- I understand that the market can and does move fast and can turn on a dime covering considerable distance.

Best of Luck.
-Barefoot Hank

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  #53 (permalink)
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Day 20: Learnings from Penny Pinching


Well GaryD, you seem to read my mind as if it is a transparent globe. Deep inside though I know I am finally being honest with myself. So here goes.


Well GaryD, I am a Toad.

Almost.

While I agree that first proving myself on sim would be necessary before I go live without being prepared, the reason I keep being mutinous above stopping live trading is that with the kind of scalping I do I feel that for slippage to be factored into the equation I need to trade atleast a minuscule amount. The profits will not be attractive enough to generate the emotional swings that I experienced earlier.

So this is what I did - I brought down my size from 250 shares / 1000 shares / 1500 shares (last two were INSANE sizes) to 2 shares per trade. I also took a single trade which earned me a profit of Rs.6 (around 8 cents) which I took only once I saw a risk free opportunity (rather - less risky and with a definable stop which offered a risk:reward of 1.5:1).

I am treading carefully, trading with a really don't care size - not sim because I need execution with real fills. Two shares is a token amount which does not kick my demons / monkeys in.

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However, just to put my psychology in the right perspective, the following passage (some text omitted and replaced by ...) from 'The Wind in the Willows' on Toad is worth reproducing here since I have read that book umpteen times since childhood and immediately identified myself with Toad after GaryD's wise words.


Hang on with me for a bit, for while the passage is slightly longish it seems relevant just now - it is to do with the crafty Toad's addiction to motor-cars. Till this point he has had many adventures just because he gets behind the wheel and takes off whenever he sees a motor-car in sight.

Chapter 11: `LIKE SUMMER TEMPESTS CAME HIS TEARS'

(Toad speaking)

`O, Ratty!' he cried. `I've been through such times since I saw you last, you can't think! Such trials, such sufferings, and all so nobly borne! Then such escapes, such disguises such subterfuges, and all so cleverly planned and carried out! Been in prison--got out of it, of course! Been thrown into a canal-- swam ashore! Stole a horse--sold him for a large sum of money! Humbugged everybody--made 'em all do exactly what I wanted! Oh, I AM a smart Toad, and no mistake! ...'

When at last Toad had talked himself to a standstill, there was silence for a while; and then the Rat said, `Now, Toady, I don't want to give you pain, after all you've been through already; but, seriously, don't you see what an awful ass you've been making of yourself? On your own admission you have been handcuffed, imprisoned, starved, chased, terrified out of your life, insulted, jeered at, and ignominiously flung into the water--by a woman, too! Where's the amusement in that? Where does the fun come in? And all because you must needs go and steal a motor-car. You know that you've never had anything but trouble from motor-cars from the moment you first set eyes on one. But if you WILL be mixed up with them--as you generally are, five minutes after you've started--why STEAL them? Be a cripple, if you think it's exciting; be a bankrupt, for a change, if you've set your mind on it: but why choose to be a convict? When are you going to be sensible, and think of your friends, and try and be a credit to them? Do you suppose it's any pleasure to me, for instance, to hear animals saying, as I go about, that I'm the chap that keeps company with gaol-birds?'

Now, it was a very comforting point in Toad's character that he was a thoroughly good-hearted animal and never minded being jawed by those who were his real friends. And even when most set upon a thing, he was always able to see the other side of the question. So although, while the Rat was talking so seriously, he kept saying to himself mutinously, `But it WAS fun, though! Awful fun!' and making strange suppressed noises inside him, k-i-ck-ck-ck, and poop-p-p, and other sounds resembling stifled snorts, or the opening of soda-water bottles, yet when the Rat had quite finished, he heaved a deep sigh and said, very nicely and humbly, `Quite right, Ratty! How SOUND you always are! Yes, I've been a conceited old ass, I can quite see that; but now I'm going to be a good Toad, and not do it any more.

Excerpted from the following website, copyright of respective owners: 11 - The Wind in the Willows - Kenneth Grahame (1859-1932)

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  #54 (permalink)
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iqgod View Post
Well GaryD, you seem to read my mind as if it is a transparent globe. Deep inside though I know I am finally being honest with myself. So here goes.


Well GaryD, I am a Toad.

Almost.

While I agree that first proving myself on sim would be necessary before I go live without being prepared, the reason I keep being mutinous above stopping live trading is that with the kind of scalping I do I feel that for slippage to be factored into the equation I need to trade atleast a minuscule amount. The profits will not be attractive enough to generate the emotional swings that I experienced earlier.

I am treading carefully, trading with a really don't care size - not sim because I need execution with real fills. Two shares is a token amount which does not kick my demons / monkeys in.


OK, fine, 2 shares. I did that for awhile. M6E was my weapon of choice, and $35 was a great day. But what would make it far safer, is to remove any additional funds that are not necessary to satisfy your broker's requirements. Trade an account where trading 2 shares might decrease your account 1 or 2%. Let's pretend it is $500.00. Run that account up 50%, or 500% if you can. But stay in control.

No demons, no monkeys, no toads, not even a rat. You are responsible for that account. Do not allow it to fall more than 2% in a day, or 5% in a week. It sounds horrible. It sounds pointless. It sounds boring and tedious. But, I made it through your stories, it seems only fair that you try mine.


Last edited by GaryD; March 28th, 2012 at 07:09 PM. Reason: spelling whiz
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  #55 (permalink)
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Iqgod, I think you have missed your calling... you make a better writer than a trader

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  #56 (permalink)
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Day 21: Conscious risk control, capital preservation

It feels great to be in control of the mouse.

It does not anymore feel like I am reaching out for it like an ingrained reaction - the feeling of THINKING about the outcomes, the amount of risk I am taking, the amount of risk that I actually take by placing a stop loss order immediately - all these have taken the incredible amount of stress out of trading I used to face earlier.

Here is today's chart of entries and exits (I missed the last trade where I would have gone long above the break of the double top bear flag - it would have been a great trade; however this time, in Thoreau fashion, my serenity is rippled but not ruffled):


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Our roots as hunter-gatherers would serve us well to make us great traders. Unfortunately we are role-playing actors in life - we are hunters in pin-stripe suites - we are conformists to a herd which is where the problem starts. Breaking away from the herd and thinking independently and calmly to decipher what those sounds in the surroundingly jungle mean, reacting quickly to the shadows moving in the forest - all those were the keys to our survival earlier, and all those are the keys to survival in the markets too.

I go back to literature again for expressing my feelings (pardon me, but ALL emotions, fleeting or great, have been already covered by the great authors) - replace NATURE with THE MARKET and all these events with the ever moving PRICE and there! you would still be describing my emotions intact in this paragraph:



Quoting 
This is a delicious evening, when the whole body is one sense, and imbibes delight through every pore. I go and come with a strange liberty in Nature, a part of herself. As I walk along the stony shore of the pond in my shirt-sleeves, though it is cool as well as cloudy and windy, and I see nothing special to attract me, all the elements are unusually congenial to me. The bullfrogs trump to usher in the night, and the note of the whip-poor-will is borne on the rippling wind from over the water. Sympathy with the fluttering alder and poplar leaves almost takes away my breath; yet, like the lake, my serenity is rippled but not ruffled. These small waves raised by the evening wind are as remote from storm as the smooth reflecting surface. Though it is now dark, the mind still blows and roars in the wood, the waves still dash, and some creatures lull the rest with their notes. The repose is never complete. The wildest animals do not repose, but seek their prey now; the fox, and skunk, and rabbit, now roam the fields and woods without fear.

Excerpted from: Solitude -- from Walden by Henry Thoreau, with notes and analysis

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  #57 (permalink)
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iggod, you were trading on a 2min chart? I just have a few ideas. Maybe change to a different platform like ThinkOrSwim. You can deposit a little like 1k and ask them to make sure the papertrading TOS platform is realtime. You mentioned Al Brooks? Did you read the original book or the new ones? Unfortunately Brooks doesn't mention much about stop management or psychologically dealing with losses in his book. It's pretty much a sink or swim message from his books. www.youtradingcoach.com has far more info on trade and stop management and trader's psychology.

I fully understand about freezing up. 2min is too fast not to have a stop especially if you have a lot of leverage or size. Maybe place the stop at the recent low or place where price action tells you that the reason for the trade was wrong and over. I'm still struggling with not letting bad stop placement kill my gains for the day or week. Keeping losses small while having had recent wins i.e. when the mind is in "revenge" trading emotions, is just one hardest hurdles..

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Congratulations on your journal!



In the spirit of our March Trading Journal contest, I am asking everyone to spend a few minutes and share their journaling experience.

A) What are the top five benefits you have seen as a result of regularly posting in this journal?

B) What are the top five problem areas you have identified as a result of regularly posting in this journal?

C) Were you initially reluctant to start this trading journal? If yes, why?

D) How do you feel, overall, about your journaling experience?

E) Would you recommend to others that they should also start a trading journal?

Thank you for taking the time to answer my questions. I appreciate your posts, and I hope you have benefited from your journal. I also know that others will benefit as well, just by reading about your own experiences.

Enjoy your weekend,
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.

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to support our community, become an Elite Member.

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Day 22: Learning Forever, Post-Challenge

GaryD posted some hours back about the sheer types of trades available in a trader’s universe. It set me thinking about his small study in putting on a few different types of trades (actually a concoction of trade period, varying trade size to keep risk percentages same, stop size, varying the scaling method, the trader’s current personality and how well (s)he can read the market on that timeframe) showed how the equity curve could be affected (tweaked positively) without compromising risk management.

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Unfortunately I made the cardinal mistake of planning the trade on another timeframe (daily) and executing the trade on a different timeframe (5 minute). I was bullish to say the least, mainly because I was expecting another leg up after yesterday’s strong momentum. I thus kept reading the market incorrectly for the whole day because of this one preconceived notion which anyway was based on shallow rooted analysis. I did not see what the market was telling me with the broken bull trend line and a fantastic pinbar below which I should have shorted.

The second mistake I made today was that since I was trading with a super reduced size of two shares, I played with my price action stop which I would otherwise have placed below the double bottom at 851 and instead leniently put it at 841 which was being untrue to my premise that I would follow the exact rules as if trading a live large account. This was my primary learning, and the market taught me hard by falling till the stop in a soft bear trending day.

The learning continues to the end of my journal. Also, I have decided not to end this journal for many reasons. mOre about those in the next post.

It also deals with how my belief systems were challenged (forever indebted to GaryD) and how I benefited from the whole excercise beyond words.


Last edited by iqgod; March 31st, 2012 at 03:41 AM. Reason: title
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Epilogue: The Completion of The Beginnings of A Trader


A) What are the top five benefits you have seen as a result of regularly posting in this journal?

B) What are the top five problem areas you have identified as a result of regularly posting in this journal?

C) Were you initially reluctant to start this trading journal? If yes, why?

D) How do you feel, overall, about your journaling experience?

E) Would you recommend to others that they should also start a trading journal?


Somehow, on non-trading days, I never have a problem getting out of bed in the morning. Thus, I woke up for the last day of the challenge, and decided that I wanted to make this one last post count and cover everything deep inside that I had missed in my flurry of trading.

In doing so, I hope to also end up answering Big Mike’s questions, and even though I have tried my best to confine them to the above questions from A to E, some of the answers really gel into one another.


Tip

The obscure we see eventually. The completely obvious, it seems, takes longer. ~Edward R. Murrow




On the last day of the challenge i.e. yesterday which was the last trading day, I was tempted to pose as a golfer who has successfully SOMEHOW got a 22 shot lead just by preaching and going into the weekend on cloud nine. However, truthfully I just want to talk about what had really happened in these four weeks and it has truly been nothing less than a miracle.

I got suckered into a long position on the last trading day which was a trend from the open bear. Perhaps it is good to have that happen to me on the last day, and I was trading really small .


Tip

A stumble may prevent a fall. ~English Proverb



I started the journal confidently, with (the now laughable) aim of teaching others how to trade – nay, a peep into the works of a master, a kind of Santa Claus gesture where I go ho,ho, ho helping traders left and right as I shove a bunchful of ideas down their chimneys while executing perfect or near-perfect trades with an occasional, small loser thrown in – and I probably tried hard too, with the first week of trading doing very very well. I felt that my trading on Day 1 (Thursday) and Day 2 (Friday) i.e. the first two days was in top form. I had a great plan, was following the plan – what could possibly go wrong? In hindsight, it feels ridiculous to have thought like this - I a consistently losing trader for the past four years, keeping a journal detailing how to go about making heaps of money. A pure ego trip.


I struggled on Day 3 (Monday) from the minute I woke up, blaming it on not being up to the mark for trading since my daughter had been unwell the whole night.

The day was to be one of my many BIG losers of the month.

Lost big on Tuesday.

Lost even bigger on Wednesday.


Taking the Blame On ME


My mind was in a state of denial – my stories were beginning to revolve around why the big losses I suffered as a day trader were because of something that was outside of my control took place each time.

However, GaryD, a fellow trader who I still uncannily felt that he stood next to me, said, "I don't feel sorry for you, it is all YOUR fault!"

At first glance, I was deeply pained at what this guy said - it wasn't very compassionate,
but then he said, "I am fed up idiots who come say they lost all their money and it wasn't their fault." And then he added “… and one of those idiots used to be ME.”


Tip

When the student is ready, the master appears. ~Buddhist Proverb




The blow-by-blow analysis was:

You want to know why it was your fault?

1. Well, first, you put all the equity you had in your account into the market without learning the ropes - that is very stupid.

2. Next, you chose to scalp and do intraday futures trading with a flaky connection with your broker, obviously you did not do enough research to see if this was sustainable (it might have been on a higher timeframe but honestly I WAS a fool trying to scalp this way.

3. Finally, judging from your personality, you wouldn't have eaten humble pie and taken the loss and cut your position. Basically, inspite of a golden shiny plan, the truth was that You had no plan that you were trading with, i.e. no target price or stop loss.

4. Thus, you were in denial the entire time of the trades and as a result you blew out your account."

It felt like this guy looked me in the eye and nailed me. I stood in utter shock and dismay and didn't say a word, but I knew that it was the truth.

The moral of his story was simple - I can't afford to go into denial and blame my losses on something that was "out of my control." A professional has to take the blame for all consequences of his trading and by taking the blame, I needed to learn to recognize mistakes and learn from the mistakes.



Quoting 

Alice came to a fork in the road. "Which road do I take?" she asked.
"Where do you want to go?" responded the Cheshire cat.
"I don't know," Alice answered.
"Then," said the cat, "it doesn't matter."
~Lewis Carroll, Alice in Wonderland

If I don’t confess to being wrong, there is no way I can learn the lesson.

My trading from NOW ONWARDS is my responsibility. GaryD discovering my journal was the BIGGEST thing that happened to me. I lost more shackles with which I had enslaved my mind that day than I had ever earlier in my life.


Tip

Losing an illusion makes you wiser than finding a truth. ~Ludwig Börne



Suddenly, I woke up. I was very nervous and weak in my knees. "Relax," I said to myself. It was just a dream, but when I saw my face in the mirror I found something looked very peculiar about it – it was as if the mirror looked back and showed my true self - hideous, dream-gilted, lost in darkness even though the Indian summer sun was warm and bright outside.

"How could I have ever done this?" I was thinking to myself.


Tip

You become responsible forever for what you've tamed. ~Antoine de Saint-Exupéry, The Little Prince, 1943



How was I going to explain to everyone that I had been so irresponsible? I broke all the rules within a week of starting my journal. The challenge was over and all the hard days and nights I had laboured to study trading seemed wasted. It took me about three days to regain my bearings (all these days I kept trading away like crazy and capital poured out of my account into other accounts prepared to receive it).

I made all sorts of mistakes which I want to recount (these mistakes had kept repeating themselves over and over and over until I took the courage to post them to a public journal, where they now have died their natural deaths, though theu still lurk in the shadows waiting to pounce if I am not alert):

1. I would find myself running to work, start my trading, and trade the first tick I see.
2. I would lose all my plan I originally had for the trades - the whole thing would go out of the window in a live market.
3. I would be so confused and muddled in execution (this, finally identified, was OVERTRADING) that I would lose sight of how many long, how many covered, what my planned bias was, and so much analysis sometimes told me to be bullish then bearish then bullish again etc till I would either be scratching trades or quickly reversing etc.- alas, brokers are very friendly with me because I line their coat pockets with so many pennies.
For the same reason as above, I would be fumbling with execution. I wanted to cover my position but some would be left (bad fill etc). As soon as I realized that I still owned some stock, I would try to sell it. But at that point the stock would be falling off a cliff, and I wouldn't get out. Deep freeze. Hand on the mouse and hovering. It would go down 20
points since I tried to sell it, and I would be down twenty times more than my planned position exit. At that point the mouse would click, and an order would be placed to sell. Then the stock would be turning around and racing up up and above. I would be trying hard to cancel my order. For some weird reasons I wouldn’t get it to cancel! I would assume that my orders are not reaching the exchange or something. Then the stock would be up by 50
points, but then my net position would be zero. I would have finally gotten a confirmation that my order has been cancelled and I was flat.Net result - loss. Then my HFT mind would say - How can this be?

Tip

Beware lest you lose the substance by grasping at the shadow. ~Aesop



My perfect week was over. Day 7 was scratched. Day 8 was rumbling with ominous sounds of an account blow up.

Same mistakes made again and again. Small gains, big losses.


I felt very tired that morning. Too tired to trade. Each time I did not trade and WATCHED I would have made great calls. While I realized that risk and money management was the key, the actual execution was not showing that I was a good trader.


I made great calls and did not take them – I had zero bucks to show for it.

I also would struggle with good predictions and then letting my guts fail. I would watch in pain as I would see a big winner happen where I had exited early. Also I was right in my initial analysis and then a second and third analysis did me in.

It was always – oh god, how much money have I left on the table! Which was where the doom started. Risk management thrown out of the window. Enter tilt mode.


I believe great traders never look back at what happens to a trade after they exit it.


The learning was that: If I don't have exit prices planned in advance, including stop loss and price targets, then I am not a professional trader.



Be right. Sit tight.

If wrong, out quick.


Of course I still haven’t scratched all the problems this new world made me confront. Journaling made me realize just how DIFFICULT a simple thing like trading really was.





Four losing days in a row were a sure sign that I should have shut shop and gone on a holiday.

But a demon inside would kindle the fire within and shout "Go on coward! Make money! Don’t run away!"

I tried second and third rounds of calm.

I was so calm that I missed all entries. I decided not to chase prices and also told myself to wait for a pullbacks, take risk free trades only. In short I was too conservative. My heart would see the small fortune that I was losing, and had I gotten in earlier, I could have been scaling in right now. It was torment to watch the trade profits (paper) grow bigger and bigger
with each tick and not be in the ride.

These last trades were devastating blows to my confidence levels. Having a trader tell you how to act was great, but many things have to be figured out before trading nirvana.

On the last day my biggest mistake was to argue with the tape. The market immediately showed me that it is always right.
But atleast GaryD’s words had made their mark and I was down to trading only two shares TILL I WILL BE PROFITABLE FOR THREE CONSECUTIVE MONTHS.


Although it sounds like common sense now, I hadn't bothered to understand this concept in the past. Reason being that I was in love with the setups I was trading and it was just an addiction. I assumed I knew that there would be a big move on which I would make a killing.
Competency or skills have to be honed first before putting big money into the market. Slow and steady wins the race.


Tip

It takes all the running you can do just to keep in the same place. ~Lewis Carroll,Through the Looking-Glass, 1872



I still commit sins. I try to gather my commitment and dedication and pick my self up everyday. Sometimes when I finally wake up the market has been open for
two hours already, and I think I don’t care. Commitment to a profession requires THE BEST. You sow what you reap.

Thus, this journal has also helped me to identify the patterns that were so elusive to nail down before. The problems identified are:
1. inferior trading tools / technology, 2. half-knowledge, 3. over leverage / over trading – i.e. lacking in 1 and 2 and yet making money available to the market

Thus only a few simple things seperate trader wannabes like me from green traders, professional traders. One thing at a time needs to be addressed.

Tip

If you chase two rabbits, you will not catch either one. ~Russian Proverb








I think I have learned the hard way from this month long challenge.

The most important thing is found to be adhering to the plan – obeying the rules and guidelines of a trading system flawlessly. Discipline in executing each and every trade according to the rules is the secret.

Publicly profiling your inner workings was the real deal. Thank you god that I had the courage to accept this challenge.

Now, more than ever, each time I am tempted to break my rules, I ask myself, "How are
you going to justify this in your journal entry?"

This self-introspection that has resulted from keeping a public journal has proven effective in ironing out even the smallest Achilles heel from my trading.

Simply by documenting the following things, remarkable things have happened:

1. Explain why you entered the trade here,
2. Explain all the if then else stuff i.e. your risk management parameters – why would you place your stops here? (position sizing – what is the maximum amount you are willing to lose on this trade?)
3. Explain why would you exit the trade here (target price)


It clears up the mind when you knowingly trade thinking that the world is watching your every action / inaction behind your shoulders.


Would I recommend journaling?


A big resounding yes.

While it is easy to get on the soap box and start preaching that you must be disciplined in following the plan religiously, it is easier said than done.

Recording everything about your trades firstly makes you cross-check whether you are following your plan.

When you write down the following parameters – 1. where you enter the trade, 2. what is expected from the trade (likely outcomes) , 3. what actually happened in the trade – you are actually entering an untapped unexplored realm, treading unfamiliar ground.

Believe me that this territory is SCARY. Include notes in your journal to allow you to learn from each trade, uncover patterns so that you become adept in recognizing your strengths and weaknesses.

Most importantly: SHUN the type trades in which you have been exploited – i.e. where your weaknesses have kicked in.

Note each time if you are always trading in your comfort level. Increase that VERY VERY gradually.

When your position is profitable, move your stop to break-even and never let profits turn into losses.


It is a shame that my life’s best weeks of trading did not make it into this journal, but the worst trades did – maybe the distribution was good for me and good for the journal – I concur it all has happened with a purpose from the higher powers that be.

I have finally shared my trading journey with my spouse. But that is for another post. My wife and I had plans for a celebration dinner following the last trading day of the challenge. But I was very depressed. I had just witnessed a brutal dwindling of my account and this was the fifth time. I promised a celebration would come only when I pay for it with my trading profits.

I must not get slack ever. The following proverb is worth taking to your trading desk each time to prevent precarious outcomes:

Tip

Before enlightenment - chop wood, carry water. After enlightenment - chop wood, carry water. ~Zen Buddhist Proverb



Last edited by iqgod; March 31st, 2012 at 04:53 PM. Reason: formatting
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