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Zen & the Art of The Small Account


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Zen & the Art of The Small Account

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  #211 (permalink)
 PandaWarrior 
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I am truly disgusted with myself today. I broke a few rules:

1. I allowed myself to be talked out of holding a good trade. My wife said, its your fault. You did not have to listen. I hate it when she's right. It is my fault. I was a good trade, I knew it, and I punched out. My fault.

  • I let a bias, which I've been pretty good at getting rid of, influence me to look only for longs this morning when I could clearly see a potentially huge short setting up. We even talked about how the lower fib line would be tested and sure enough it was.
  • I took a legit entry but moved my stop to soon. I refused to allow a winner to turn into a loser. Trouble here was, I had gotten greedy. I thought there was a lot more in the trade and instead of taking my target which would have filled, I slipped the target up a bit, moved my stop to BE+1, was taken out by one tick, then prices rallied to more than fill what would have been my larger target.
  • I set my stop in the wrong place on the last trade. Had I placed it correctly per my rules, the trade would have been just fine. I was tired of seeing red on the screen and probably a little pissed off I had made so many mental mistakes and made another one. Of course, one tick stop, then target filled.

My trading buddy made money trading almost the exact same signals. He held the trades and I didn't. I am happy for him, disgusted with myself.

I heard this morning running through my head after the second or third mental mistake. I could hear them laughing and saying, "see I told you couldn't trade a small account". This really pissed me off. Both the fact I could hear it in my head and the fact I allowed to run for more than a minute.

I will succeed in this. I have an edge. Proven through great sacrifice of time and emotion. I will work it out. I will be the successful trader I know I can be.



I posted my charts. Not because I want to. I am embarrassed. But because I promised I would. At least I can keep that rule today.


To the naysayers out there, I say this: Watch and learn! (quoting my daughter now)



Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #212 (permalink)
 PandaWarrior 
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itrade2win View Post
AZ,

Unless, you have a zero handicap how can you get bored with playing golf everyday? Golf is a hugh mental game. Why not work on your golf game? Improving your golf game may help you improve your trading game mentally. Golf and trading are my two biggest passions.

Cheers
itrade

Good point. I love to golf. And I used to play every day. Handicap was down to around 8-9. Can't really remember its been so long. Now I have trouble justifying the time. 4-5 hours away from work/family/etc has been tough for me. But my life and values have changed so much over the last few years and golf has become less of a priority. I think that happened when we adopted our daughter. She does like to golf though. Actually, she likes to drive the cart. I took her when she was only 4-5 and let her drive. It was a blast.

Did I mention its a 110 degrees here with about 35% humidity. Its a death sentence to play golf in the summer!

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #213 (permalink)
 PandaWarrior 
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What can I say. Live money is so much harder than sim. Pulling the trigger is no longer the issue. I have 62 trades on for the month. Probably more than I've ever taken in the previous 18 months combined.

Holding them is the issue.

Today, I am down $175 on 9 trades. At first, I kept the losers small and had a small positive for the day. But once again, failure to hold and failure to place the stop in the correct place was the undoing of my day.

My wife says to me, "If you are not following the rules, I will kick your ass". But she said it nicely but with that special gleam in her eye I know so well! She understands that even with rules, there will be losers. But not following the rules is in her mind, just stupid. And she is right.

So the account has taken a bit of a hit this month. And so has my confidence. But I suppose this is normal for a return to live trading. This has happened before and I would go on a holy grail search. Not this time around.

What is different now is my belief in the fact I have developed an edge. I only need to execute with confidence.

So I work on confidence. How does this work? I believe by continuing to try. Each day work on doing the one thing I have the most trouble with. Holding a trade.

In May, I challenged myself to take one trade per day regardless if it was a winner or a loser. At that time, I couldn't pull the trigger. That issue is apparently solved for the most part because I set the goal and I accomplished it in May.

Going forward, my goal for the next two weeks is to hold my first trade to target. One trade per day. After that, go to sim. At the end of two weeks, I will be either broke or recouped my losses completely plus a little bit.

Later today , I will be exploring the option of trading an instrument with a smaller point value just so I can build up my confidence without large consequences for being wrong. This sounds like a good idea but it also sounds like admitting defeat which is something I rarely do and so I am torn.

More on this in the next day or two.

Got The Daily Trading Coach today. Will sit down and figure out how best to use it. I am looking forward to it.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #214 (permalink)
 PandaWarrior 
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Not the programing language, the grade.

My goal was one trade held to completion. I had two trades, the first one was a rule based entry for which I place my stop properly, but prices closed opposite of what I expected them to do and I punched out with a 5 tick loss. This entry, had I held it would have paid.

I got another short signal right away and took this one as well. This trade was executed perfectly. Stop placed properly, and I held through the heat. Actually what I did was put the target and stop in and closed my eyes. I resolved to hold it until either was hit and the nice Ninja lady told which had happened without opening my eyes. Nothing happened for a long time. I sneaked a peek. I was down 10 ticks and stop at 13 ticks. I just closed my eyes again, and waited. Still no voice for what seemed like forever. Had to peek. I was BE. Prices were coming my way. Tempted to punch out and take the commission loss. But I sat on my hands and closed my eyes again. Next peek, down 5 ticks, now I said, crap, should have taken the BE. But no, the chart still said short so I waited again, now I kept my eyes open because if prices went up any further, I'd kick myself for being BE and not taking it. This is the wrong thing to think if the chart still says short but I thought it anyway.

Finally, I get a break, up 2,3,4,5,6 ticks....starting to feel proud of myself for being brave. 7,8,6,5,4,3,4,5,6,7,8,9 I move stop to BE+1. Now I don't care what happens. It painted 9 ticks of profit, and if I make the money great, if I make 1 tick, that's fine as well. My trade management up to this point has been perfect. The entry has done what my system says it might do, so far so good.

From 9 ticks of profit, I get a rapid bounce, a stop fill and then a reversal to my target very quickly. Now my A+ trade just went to a C because nowhere in my rules did I call for a BE+1 if prices paint 9.

But overall, I am very happy with today's trades. I did not have optimum trade selection but they were decent. I held the first one as long as I thought prudent although I was wrong about that and the second missed being perfect by 2 ticks.

Not bad for having been unable all month of holding a trade to completion.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #215 (permalink)
 PandaWarrior 
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Today was option expiration day and I had some personal stuff come up last night that needed attention today so I was not available for trading.

Had a light bulb moment (I hope) a few weeks ago.....ok, it was a small flashlight moment, about my trading style. It was one of those fleeting thoughts that can haunt you for weeks until you remember it and another piece of the puzzle drops in and suddenly you have a true aha moment.

I think one of the reasons I've had such a hard time this month is that fleeting thought put something in my head I knew to be true and I was trading against it so I had conflicting subconscious thoughts about this issue. While I won't say what it is at the moment because I have not had an opportunity to test it, yesterday in the shower, I felt like one of the last pieces of the puzzle dropped into place for me.

While I've not traded today, I did have an opportunity to look at the chart and the price action gave credence to the fleeting thought I had the other day.

Next week I will be carefully trading with what I believe is new understanding about how my method really works. Once tested for a few days, I will post an updated chart. Suffice to say, I am removing another indicator as I believe I no longer need it.

Once I have tested the theory, I will post in somewhat more detail about it and what my original thought was and how it played out in live markets.

By the way, been reading The Market Wizards. This book is awesome. If you've not read it, you must get a copy and read it. These are very good traders and they really talk about how to be a successful trader. It is a must read.

Have a great weekend.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #216 (permalink)
 PandaWarrior 
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Today was the first day of testing the light bulb moment I had last week.

I began by writing a weekly trading plan based on what the daily chart was telling me. I worked out a plan for both a short and long scenario with my basis toward the short side but also understanding that at current levels, a potential turn around and test of the $80 level was possible. But overall, indications were that the short would continue.

I started in sim and had a bit of a rough time. I was long at one point as I felt that today might be the day to begin the retest of $80. In fact, we did have a nice long which I caught almost all of in sim. I had two stops prior to that though.

When prices failed to make a HH, I knew the the LOD was in play. But I did not take either a live or sim position. Not sure why although I think I was still thinking about a possible $80 retest in the works.

Prices pulled back all the way to my 50% line, and held underneath. My plan calls for shorting any rallies that happen if prices are stuck under the 50 line. With live money though, I shorted the break of the double bottom. This was my first live money trade and was stopped out. I re-shorted but before weakness was confirmed. This was also stopped out.

Finally the 50 was retested, and I shorted it per plan but on sim for a net of 31 ticks. I took the trade off prior to any real exit signal though and prices fell even further. This cost me an extra 40 ticks of lost profit.

I then re-shorted the rally and made another 10 ticks in sim but again, profit target was too small, 40 ticks were possible on this short.

Overall, my pre-session game plan played out almost perfectly, the only thing I did not foresee was the higher high today which threw me off a tad. Other than that, my Sunday evening calls were right on.

The only real issue with today is this: I did not execute my live trades according to plan.

I have both the live chart and the sim chart up for review.

I give myself an A for having a trading plan and seeing it play out live.
An F for live money execution. And a C for sim money execution.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #217 (permalink)
 Big Mike 
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The first short looks right. They don't always work, it's part of it. Keep the losers small and move on. The second short was early. When you got stopped out on this, you ended up missing the right time to short this breakdown. Timing is everything Patience is one of the absolute hardest things to master in trading.

Mike

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 PandaWarrior 
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Big Mike View Post
The first short looks right. They don't always work, it's part of it. Keep the losers small and move on. The second short was early. When you got stopped out on this, you ended up missing the right time to short this breakdown. Timing is everything Patience is one of the absolute hardest things to master in trading.

Mike

The first short would look right if I had a breakout trade anywhere in my trade rules. I don't, so this trade was a total rule break. The reason I took it was simple after discussing with my trading buddy. I was afraid. I had been expecting a break down all morning. This one looked like it was going to be the one. I was afraid of missing the break down. So a rule break based on fear. Wrong choice.

The second one I feel slightly better about but my methodology says wait for the retrace which happened a bit later, again, this trade was taken too soon. I did take the correct trade on sim but by then I was pretty upset with myself for taking two bad trades in a row. Not that they stopped out, but that I broke my rules out of fear. I refused to trade live money until I got my emotions under control.

I also over traded on sim. My method can allow for around 3-5 trades per day now. I had 14 I think. Trading in the chop will do that to you.

So tomorrow, only live trades, no sim AND only two trades allowed. I must wait for the setups I am expecting and looking for.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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 Big Mike 
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aztrader9 View Post
The first short would look right if I had a breakout trade anywhere in my trade rules. I don't, so this trade was a total rule break. The reason I took it was simple after discussing with my trading buddy.

...

So tomorrow, only live trades, no sim AND only two trades allowed. I must wait for the setups I am expecting and looking for.

Ok yes, then bad trade A trade is good when you follow your rules, regardless if the trade was profitable or not. A trade is bad when you didn't follow your rules, regardless if it was profitable or not

Sounds like a good plan for tomorrow. Baby steps to get you back in the saddle.

Mike

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  #220 (permalink)
 PandaWarrior 
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Today was a spectacular failure in terms of expected outcome when compared to what was possible!

I've been thinking a lot about today's trades, both the sim and live money ones.

I felt like I turned a corner last week in deciding I no longer needed a moving average on my chart. And I think that is the correct feeling. The average was both helpful in trends and devastating in chop. I figured I could trade the chop by just not trading or only selling rallies or buying pullbacks within a certain fib area and I think this true. But I failed in this today. I also felt I could capture the daily move by being aggressive when strength or weakness showed itself and again this was true today. In fact, in sim mode, I captured a 53 tick long trade and I knew almost to the tick where to get out. It was beautiful. And I found the exact moment when the short trade really set up and I held that one for 31 ticks. 84 ticks in sim. The premise taking the trades around areas where weakness and strength showed up were solid. Its something I can use going forward to enhance my trading as I suspect my thought process around this is on the mark.

I also saw my game plan unfold almost exactly like I expected it to which was hugely gratifying but ultimately useless due to poor execution.

The small account is much harder to trade, I understand and acknowledge this fact. It is highly unlikely that most people will hang on to their money long enough to figure out they are the problem and fix that first. This also holds true for me.

Last month, I traded a $1000 account in sim to $5000. I figured I could translate this right away to real money. However, I still had some conflicts remaining about two things;

First, using fib numbers along with a moving average. The MA was a crutch I was using for confirmation. This is fine when the ranges are larger but when the daily range compresses a bit like it has over the last few days, the MA will kill you. But more than this, the MA is not congruent with my belief system. In other words, fibs are about "predicting" where price MAY go and developing a plan to trade based on what happens when price arrives at your expected trigger point. Fibs are also about support and resistance. And in these two regards, a MA has no place in the trading arsenal. I do believe there are many valid trading methods that incorporate MAs but mine is not one of them. So I was trading in conflict with my internal belief system. This is not good.

The second this is more subtle. I have 18 months of failure that reinforce the idea that a small account is bad news. July only proved the math is possible. What it did not prove was that the mental part was taken care of. This is where the small account holders fail. And where currently I am failing.

But here is where my wake up call came today:

1. I do in fact have a really good edge. I can trust it
2. Patience is my real weakness as the edge requires patience.
3. Even though the last 18 months have been full of failure, IF I can control the need to "be trading" and be patient, I do see the HPEs as they happen. And I can hold them as long as they need to be held. I thought my failure to hold previous trades was just foolish emotion but in fact, it was my subconscious telling me I traded wrong. Yes, some if not most of those trades would have given me 10 ticks, but the real trades my method sets up for me, I was passing on and then trying to make it up later with lower probability trades. Taking the LPE was in fact, revenge trading.

Dr. Brett says to use fear as a motivator but to do it opposite of what I am used to. Instead of the fear based action I displayed today, I should say this; "What happens if I DON'T display patience and wait for the HPE I know is coming?" The answer is: I will take another LPE and pay for it with emotional conflict and probably a losing trade. This will further exacerbate the trend toward failure and a further postponement of my goals. So I will wait for the HPE and take it with confidence, knowing I did the right thing regardless of the outcome for I cannot afford to further postpone progress toward my goals.

This trading game is fun and mentally challenging. Bu the thing I love most about it is that it forces you to confront the hard questions in your life. Its not fun but it is rewarding.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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