well i haven't blown my trading account yet, but i'm not too far off (down 32%). i've had much trading experience, but limited day trading of personal funds. i'm starting this journal to help get my thoughts on 'paper' and try to make it easier for me to follow my own trading guidelines. i say guidelines, but as i cannot seem to stick to them (with disasterous consequences) they are actually declared as RULES that must be adhered to.
starting return: -32% (yesterday's return -19%)
rule1: 3 tick hard stop loss (cross spread to get out)
rule2: 2% day stop loss (cease trading for day)
rule3: 2hr max w/o break (10mins)
rule4: 45min break during trading day
rule5: max 6 trades/day
rule6: max pos size = 10
my pattern thus far has been for about 80% profitable days, followed by crash and burns. Clearly, i need to eliminate the big down days. Its also clear that success rate will decline as i limit larger swings but this is necessary to properly establish a trading methodology.
i trade nikkei futures and the approach i seem to be gravitating towards is very short time scale. I'm looking to make or lose just a few ticks. I dont have any indicators on my charts except for support/resistance levels. However, I do follow correlated products very closely, eg JPY, ES. I'm aware that fees will tear me apart if i'm not careful so i try to take min 2 ticks profit, but 2 is also my standard amt. Fees are 0.2 ticks round trip. So to make money my success rate has to be > 60%. This sounds unlikely when i write it....but so far my experience leads me to believe that it is perhaps possible. I'm down pretty big but the source of this is not cutting losers with any semblance of risk management. I "blow up" and risk management becomes background noise that i seem to deem a distraction. Anyway, here are todays trades:
1: B 9725, S 9710. -15. stopped out
2: B 9680, S 9710. +30. profit target.
3: B 9695, S 9680. -15. stopped out**
4: B 9680, S 9710. +30. profit target**
**i'm very confused about this. Rule #3 was to take 3 tick losers but when it got to that level i realised that I wanted to put the same trade back on at the stop loss level. So rather than selling 9680 then buying 9680 i did a pseudo stop loss where i entered it as a new trade but did not send the orders to market. So in reality i was risking more than 3 ticks! what to do in this situation? i'm not sure how to handle it.
5: S 9765, B 9755. +10. profit target. half size
6: B 9750, S 9740. -10. stopped out. half size
7: B 9740, S 9730. -10. stopped out**. half size
8: B 9730, S 9750. +20. profit target**. half size
**same as above. pseudo stop loss.
My big conundrum for the day is how to maintain disciplined stop losses on each trade given that often i like the trade even better at the stop level. One option is to not do the re-entry. Another is to just rely on the daily stop loss. Or i could widen the per trade stop loss. The whole crux of my issues are to make sure i stop myself out before it gets out of hand.
I also blew rule #5, doing more than 6 trades. I think i paid the penalty for this as i prob would have been more careful with my entries otherwise and not taken the stop loss in trade 6.
All in all, not really a great way to start the next leg of my journey...to break a rule on day 1. not a great sign and cos i actually did quite well in the end i worry that i haven't learnt this lesson.
Last edited by jessel; December 14th, 2012 at 03:50 AM.
Just an idea that comes into my mind as i just read:
IMO it depends, generally it is a bad thing to break your own rules since they exist for a reason, but since you seem to be struggling with your stop level, i suggest looking deeper into your strategy and write down your feelings on every trade (as you started with the stop loss "problem" with reentering). I may be possible, that the strategy just not fits your personality well enough to follow it. Rigid rules only work when your mindset really accepts them, otherwise you will find ways to talk yourself out of it. It may be possible, that you need another one or two paradigm shifts in your way of thinking, so i suggest reading some more stuff on trading psychology (start right here in the forum) and maybe dig a bit into the position sizing methods, expectancy and r-multiplies of "Van Tharp". It may help you to develop a strategy that you can execute without hesitation if you see clearly what you can expect from it over the long run. It helped me as i was in your situation, so maybe it will help you too.