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Nice trade despite the outcome! It seems like your system gets you in on the right side of the market, but you keep getting stops tagged before your move happens. I'm sure you've noticed this ...but pretty good trades regardless. Happy Friday!
I really appreciate the encouragement from the three of you. It shows that you care! I'll be sure to be supportive of you all as well. Thank you guys.
Despite having 5 consecutive losers this week, I feel "meh" about it now (there were points in the week where I was not happy because of these losses, but I've rebounded). Whenever I'm going through a bit of a rough patch in my trading, generally I look back and compare how I'm handling the situation that I'm currently in, to how I would have or did deal with a similar situation back then. I gotta say, 5 losses in a row would've made me want to reset my SIM account balance and start over 3 months ago. I actually did this many times. Now, I'm finally accepting what I learned when I first started trading: that individual outcomes do not matter. Of course the individual outcomes are important in that, when they're summed, they all together potentially signify edge, but they shouldn't be the focal point of my attention. What obviously matters more is to stay consistent and to stay disciplined, and to trade until I see either a net negative or net positive result, and that's what I intend to do! I realize it doesn't make sense to keep restarting over and over again because if I did, I wouldn't know if I had edge or not. I knew this before, but I'm really "living" it now.
Also, I think that because of this draw-down, I'm virtually being forced into doing the right things. The past two trades that I took have been decent in terms of set-up selection, and because my stops are so small, it would be illogical for me to interfere so I don't and haven't, and won't. So by being put in this situation, I'm having to do things out of necessity that I ordinarily would neglect to do, maybe because of PnL "wiggle room?" I'm not so sure, but something has changed. What matters to me now is replicating this behavior and making it habitual.
As for my trading this week-end- I've got some pre-back-testing to do! I've come up with a bunch of probability questions that I could try to solve, by analyzing charts of dates that I haven't determined yet. Here's one example/what I mean:
"Given that it's between 7am-12pm, and given that price has reversed 5 points, what's the probability that price will continue 4 points?"
I would look for this conditional event in the data and try to establish it's probability over a period of time. Why not just back-test a pre-conceived pattern with an entry/exit schema? Because I have nothing to work with, and these probability questions may give me a direction that I could back-test different strategies from. Plus, I have time, and I would love working this way. So I'm very excited about this approach to back-testing, and I wouldn't have thought of it if I hadn't studied a little bit of conditional probability. I know I'll have to be very careful and diligent in identifying these events; both the positive and negative contributors of the net probability.
Anyways, that's enough writing for now! You'll be hearing from me again this weekend.
I went through @PandaWarriors journal called "The PandaWarrior Chronicles" this morning. I copied and pasted a bunch of the best of his posts and replies from other members into notepad. Here are a few quotes that are especially relevant to me:
"You are more than capable of intellectualizing and philosophizing about what is logical and correct in reference to strategy and execution, yet you cannot control your instinctual impulses to do what makes you feel good, rather than what is good for your.trading. It is the eternal struggle between impulse and intellect, and seems very evident in your writings.
While you judge yourself by your trading progress to a great extent, you are overly concerned about the outcome. You prefer to make a trade on a signal from a lagging indicator, rather than on your own intuitive sense , which you have developed from studying price action. In this way you can blame the indicator, when the market does not do what it “supposed” to do, and not yourself. You talk about trading correctly, in the future, but adopt a methodology you know is incorrect in the present.
Most traders allow their emotions to fluctuate with their P&L and the quality of their execution, instead of remaining consistent and even tempered. To combat this tendency, traders need to be prepared at all times. They have to have an idea of what they are going to do, when the market does what it is going to do.
Too much emphasis is placed on initiating the trade ”perfectly” and not on the exit. Don’t try to predict how long the move will be, let the market tell you when to get out. Get out of your longs when you don’t want to be long anymore, not because it feels good to book a profit. Don’t just take small losses, but take optimal losses. Take your loss and get over with it - you’re not always going to get it right." -@tigertrader
tigertrader: "Az is an intelligent person. He realizes the difference between proper technique and improper technique, but allows his impulses to guide his actions. Then, it's a classic case of cognitive dissonance/adaptive preference formation.
(tigertrader quoting PandaWarrior): So what if I quit at 80 ticks. The trend could have been over at that point and I would spend the rest of the day giving back. That's the uncertainty of the market. Its easy to judge in hindsight. I don't care at all that it continued on for quite a while. I got what I came for.
He does something "wrong" and acknowledges that fact, but then proceeds to somehow explain it away and justify his actions. Very inhibiting, if not destructive behavior for a trader. He needs to be honest with himself, and acknowledge his pattern of behavior. He needs to place as much, if not more, emphasis on the emotional/cognitive aspects of trading, than on methodology, markets, and money management."
PandaWarrior: "I learned something yesterday from the book about fear I am reading. In it, the author states that our desire to avoid uncertainty will lead us to choose the known negative outcome over an unknown positive outcome. This struck a cord in me in terms of holding a trade for a much larger or even unknown target. Easier to opt for the small loss or small win that face unknown amounts of time waiting for an uncertain event.....50-100 or more ticks to materialize or even worse, price action to tell me when to exit.
This was and is, an unnerving discovery. That our brains will short circuit our best intentions. All without a single rational thought to the contrary."
This is my first post in my new journal. In it I will attempt to document my set ups, my reasoning behind why I took the trades, along with the emotions I was feeling during the trades.
I will also attempt to post a chart daily and at least once a week, …
I'm glad you found some value in there. Much of what I wrote is just bull shit in hindsight. Much of what tigertrader wrote was spot on but delivered in what I considered the most antagonist manner possible. In my opinion at the time, rarely did he ever point out the correct thing to do or way to behave but rather pointed out what was wrong in his opinion without offering a solution. If you find value in what he wrote, then by all means, use what you can.
That thread was started 9 years ago and ended 5 years ago. The issues that were identified in that thread by myself and others still exist today. They don't go away, you just get better at dealing with them. I still trade, I still win and lose but rarely do I obsess over it now. Its just the game. Occasionally and this week was one of those times, you make a series of mistakes and then you do some inner work to figure out why, get a handle on it and go back to trading in a rational methodical manner that takes the worst of your emotions into consideration and while its still uncomfortable, you do it anyway.
Fear, impatience, greed, uncertainty will always be your companion. I think at best you learn to make peace with them, be mindful of where and why they appear in your life and in your trading and do what is right anyway. The ego is not who you are, the ego in it's relentless need to be right and be comfortable is what drives these negative emotions. Laying down the ego is essentially the best way to succeed at this game. Its the damnedest thing this trading game. We think its all about what we see on the chart or the method or technical s or whatever and really its just about who and what you are internally.
Best of luck in your trading game.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
Despite the major loss, it's been a beautiful day. It's finally getting bright, warm and sunny up here in Maine, so after my losses, I decided to go for a long run. I ended up travelling 9.2 miles (I walked the last couple miles), and even though my feet and calves ache now, I feel wonderful. I'm writing this in the afterglow of that major trek. Onto my trades:
^ This was my first trades stop/entry/profit target layout. I was anticipating a bullish breakout, and I wanted to get in long after price passed 2905, where the middle blue line is. My profit target was obviously above, and the stop loss was below.. I intended to enter whenever price crossed that middle line, but I wanted it to before the open, given that I use a small stop and there's lower volume and volatility before the open. Price eventually did, I went long, and I quickly got stopped out of that trade, but I still felt confident in what was going to happen, so I entered again later on. End result:
As you can see, this happened twice. I wasn't emotional at all after either of the losses, I've been feeling pretty "zen" lately. This is what I'm thinking about now, because the issue has become very obvious: I have poor immediate trade location. I am usually right about where a trend is going in the longer-term, but I have a hard time finding proper entries- and using a 2 point stop, especially at and after the open, hardly works for me. I always buy or sell at the wrong time and get stopped out, then watch as price goes my way. This has occurred again and again in my trading. So this needs to change- I need to work on my entries. I could do this simply by being more patient.
With that being said, this problem could be greatly diminished with a wider stop loss. I don't like trading with a 2 point stop because I actually want to trade at and after the open now. That's where the volatility is after all! So I'm limited to how wide of a stop loss I can use because of my small account size. As of now, 2% of my account (max proper risk) is $82. I'm not even fit for trading the ES, with the ~$4000 that I have. I'm almost at a 20% drawdown, and I feel that I'm in the event horizon, and the only way I'll come out of it is if I get very lucky. So what's the point of this? Would I trade the ES with a ~$4000 account in real life? Now that I know better, absolutely not- which renders continuing this account pointless. (You probably saw this coming)
Thankfully, the Micro ES is up and running now. I think I'll be switching over to it completely, because it's a much more practical market for me to trade in real life. I won't be trading it live immediately, not until I find potential edge through back-testing or find success trading it with discretion. I want to do this the right way, and I've realized that I simply don't have enough capital to trade the ES, and that I'm not skilled enough yet. So I'm taking that imaginary $4000 and discretionarily trading the Micro ES with it. I'll be able to use appropriate stops, I'll be able to handle drawdowns, and I'll feel way less pressure because I'd have sufficient capital. So that's what I'm going to do!
+$1.29 for the day. On my first trade, I made 7 ticks. On the second trade, I lost 10 ticks, and on the third, I gained 6 ticks, leaving me with 3 ticks of gain. Including commissions, I'm left with a ~dollar of profit.
I went through the process this morning that I used to practice back in the days when I always used a 4 point stop for every trade. I had come up with 3 different scenarios that I thought were likely to happen, and prepared entry and exit layouts for each scenario. The second scenario that I had thought of, did happen, and it was a bearish break-out. I got in just as I had planned and made a small profit:
I did have a profit target in place, but there was a surge of bullish momentum that I took as a signal to get out. I'm glad I did, because price overreacted and I would've been stopped out. But, immediately after I closed, I felt stupid because I know I shouldn't be messing with positions and that I should back my ideas. So I established to myself that on the next bearish move, I would go short again, and let the trade run. Of course there was the move, and I entered. Here's the result:
Admittedly, I got very frustrated in the middle of this trade. My zen left me. I felt even more ridiculous now, because I had re-entered a position that I already thought was a good idea to get out of. I was conflicted. Anyways, I was very convinced that I was going to get stopped out, so I closed the position 2 ticks before I would've been. At this point, I recognized that I was too attached to the outcome, and that's the reason I closed early in the first place, and that's the reason I got in a second time. I settled down, and realized I was still so far away from my daily max loss limit (1%/$40/8pts.). I got my head together and simply paid closer attention to what price was doing. The tides had changed, and price was moving up. I saw a bullish opportunity and I took it:
I gotta say, this market is very reactive. As for today's action, you couldn't stay in a trade for too long, because of that reactivity. I noticed that there wasn't much room for continuation after hesitation, as in, if price suddenly stopped when in a bullish trend, a second later, price would be down 3 ticks or so. I just realized that if I had traded this the right way; if I had held my trades until I got stopped out or until I had reached my profit target, I would've been stopped out of every one of them- I don't like that! So, I think I need to tighten up my profit targets a bit, and be more selective. I do not like how I entered the same trade a second time, and I especially don't like how frustrated I got when price went against me.
I need to characterize how I traded today in one paragraph, conclusively. This is going to be redundant: I had come up with multiple scenarios of price action and ordered entry/exit layouts around them. When the time came, I followed through and acted (entered) on the plan for scenario 2. I had a profit target placed for that scenario and plan, but because of an oppositional surge, I closed early. I felt that I had violated my own trading principles in doing this, but it also felt like the right thing to do at the time. (Conflict of different methods of trading) Since my profit target wasn't reached, and I still felt confident in scenario 2's plan, I re-entered on bearish momentum that fizzled out quickly. I thought and felt like I was going to get stopped out (price was reacting terribly), so I exited 2 ticks early. I was correct, I would've been stopped out. I calmed down, and looked for another opportunity. I eventually acted on one after paying close attention to what price was doing in the moment. After entry, and after a very short amount of time, there was hesitation from my side that I didn't like the looks of. I got out early with some profit, and I was correct to get out then because price reversed right after.
So it could be said, that in certain markets, in certain conditions, that acting in a reactive manner is appropriate. But maybe it's better not to trade in these conditions, unless you're proficient in this way of trading. I feel uneasy that what I know to be right behavior in trading, absolutely did not apply today. With all of this information, how do I go about trading tomorrow?
1. I took my first trade at around 9:10-9:15 this morning, although I was eye-ing price since 7. Volume and volatility picked up after 9am, so I will trade after 9.
2. I love coming up with price scenarios and creating entries and exits for them, so I will be repeating this tomorrow morning.
3. I'm going to set shorter profit targets.
4. Since I have enough capital to trade, and I'm able to take multiple trades in one day, getting stopped out shouldn't be a problem. So I will allow myself to get stopped out/I won't interfere with trades. (An exercise in discipline)
5. There is nothing inherently bad about re-entering a position, but I did so emotionally. Re-entering a trend is acceptable if the idea of doing so is upon a logical conclusion.
6. I need to find a way to ground myself when I'm trading, when I get a little out of hand. I broke my meditative state of mind through giving into a string of thoughts that reminded me that I did something wrong. I was then operating like I used to- which out of sheer luck, made me marginally green for the day.
What am I good at:
- Anticipating general market direction.
What am I bad at:
- Holding trades.
- Knowing when to enter on a tick by tick level.
Therefore, I should create plans, and stick to those plans. When those plans are in accordance with promising price momentum; when price is convincingly moving in one direction, I should follow through with those plans, enter, and let my profit target or stop get hit. That's how I personally should trade, so that's what I'll do. I'll be behaving this way consistently- I won't make the same mistakes I did today, tomorrow. Today, I simply focused on the outcome too much, because this was my first day trading the Micro ES, and I was invested in having a green day for my first day.
It's crazy that you wrote this...my mantra for today was: We are not making yesterday's mistakes. And I think it helped me avoid making those same mistakes. Of course I made a new batch of mistakes that I'll need to avoid tomorrow...My other mantra was "serenity now...SERENITY NOW!!!!"
...but pretty good trades regardless. Happy Friday!
