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Refining my STRATEGY, Eliminating FEAR and Instilling DISCIPLINE.
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Refining my STRATEGY, Eliminating FEAR and Instilling DISCIPLINE.

  #91 (permalink)
Trading for Fun
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monpere View Post
How are they totally different? Do you find you are trading double tops in sim, and trend line breaks live? .

My trades are shorter in live trading. I get in late and exit sooner. Basically I attempt to scalp within my signals, and often get in and out several times instead of just holding for the whole duration of the setup.

I don't necessarily have more trades in live than I do while paper trading though, because I also don't act on all of my entry signals due to second guessing.




monpere View Post
Try this, take one of the setups you trade, find the best possible occurrence of it, the most perfect one. Now describe that setup, and write down the description as a bulleted list. Now go in sim and trade that setup exactly according to that bulleted list for a week, while you still keep your journal. If you are profitable, then go live and trade that set up and trade it exactly according to the bulleted list for a week, and continue to journal through the entire process. Then examine your sim/live performance again. I bet you the difference you will find, is that your exits are worst live then in sim. Now, define a bulleted list on how to exit, and go through the whole process again..

The definition of the setup should be thorough enough, including market state, S/R, time of day, etc. whatever you generally find important in your trading. The first thing you will realize through this exercise is that you will be taking fewer trades, because you are now by default waiting for the technically better setups. This might be difficult at first, because you will see some so-so setups go by that make money, and you will say 'Crap! I could have made money on that one', that is a natural response, but that is the very response which is also responsible for the difference in your sim to live trading. That's the response that will urge you to take a bunch of bad/mediocre/risky setups, make you get in too late, get out to early etc., when trading live. It is the greed/fear/confidence response which is not a factor in sim. It is the same as the fight/flight response when we face danger, it is part of our natural survival instinct.

Now, you don't have to doubt your judgment anymore, because you know every setup you take is technically the best it can be, in the absence of a crystal ball. If that setup does not work, it is because the market just moved that way, and nothing you could have done could have changed that outcome. Now, given that you are taking only the best technically defined setups, there is no reason to cherry pick them. Discretion = Judgment, and judgment is clouded by emotion, your judgment will be affected by pride, confidence, fear, greed, etc. the moment you have 5 cents at risk. You can greatly eliminate the fear in your trading when you remove as much of the psychological aspects from it.

The best occurrence of my setup happens about once a day or every other day. I told myself several times I should just trade that setup, but get bored waiting around for it after about 3 days of paper trading. Then I am eager to go try it out in Live -and always miss the entry signal! I am starting to think it's due to some sort of self-sabotage.

I am planning to devote this weekend (since it's suppose to rain anyway) to further (or better) defining my entry and exit signals in order to remove what you call discretion so that I can reduce my constant second guessing.

This week during live trading, my second guessing has caused me to constantly miss entry signals, chase, enter late and get stopped out of trades, that should have been profitable, at a loss. In paper trading my losses are smaller than my wins, however, right now in live, even though my win to loss ratio is 1.6:1, my average loss is $106 and my average win is just 37 dollars!! For some strange reason I am willing to take the losses but jump out as soon as I have a penny to my name.

Thank you kindly for your suggestions, much appreciated.

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  #92 (permalink)
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TriggerShy View Post
My trades are shorter in live trading. I get in late and exit sooner. Basically I attempt to scalp within my signals, and often get in and out several times instead of just holding for the whole duration of the setup.

I don't necessarily have more trades in live than I do while paper trading though, because I also don't act on all of my entry signals due to second guessing.





The best occurrence of my setup happens about once a day or every other day. I told myself several times I should just trade that setup, but get bored waiting around for it after about 3 days of paper trading. Then I am eager to go try it out in Live -and always miss the entry signal! I am starting to think it's due to some sort of self-sabotage.

I am planning to devote this weekend (since it's suppose to rain anyway) to further (or better) defining my entry and exit signals in order to remove what you call discretion so that I can reduce my constant second guessing.

This week during live trading, my second guessing has caused me to constantly miss entry signals, chase, enter late and get stopped out of trades, that should have been profitable, at a loss. In paper trading my losses are smaller than my wins, however, right now in live, even though my win to loss ratio is 1.6:1, my average loss is $106 and my average win is just 37 dollars!! For some strange reason I am willing to take the losses but jump out as soon as I have a penny to my name.

Thank you kindly for your suggestions, much appreciated.

"Feelings-from explicit emotions to felt body states--are joined with perceptions to guide our behavior."

Fear/ flight is an explicit emotion that every person is born with fully developed. It is what makes you get out of your losers quickly. Secondary emotions are learned over time, and encompass more complex emotions like fear before an exam, or sadness upon learning of tragedy.

Experienced traders receive valuable physical and emotional signals that help guide them in their decision making. When you make the switch from SIM to LIVE, you experience inherent anxiety, (greed/fear), and a myriad of other cognitive rationalizations that override the emotional signals that guide good desicion making. It is this temporary lack of access to these signals that leads you to making impulsive or less than favorable decisions when you are LIVE.

In orther words, it has felt exceptionally good everytime you have had a winning trade. so, when you are in a profitable trade, it activates feelings associated with previous experiences with winning trades. It feels good to be up money so you are predisposed to get out of the trade,( before it turns into a loser), so you can enjoy the positive feeling. Your decision to get out of the trade is not based on the rational process of risk/reward or money mangement, rather than the feeling state mixed with the perception of a winning trade.

You would be better served by working on ways to relax and maintain a clear mind so as not to obscure the signals that are necessary for sound decision making, and on observing and accurately assessing your emotional state, rather than working on and waiting for your setups.

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  #93 (permalink)
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TriggerShy View Post
My trades are shorter in live trading. I get in late and exit sooner. Basically I attempt to scalp within my signals, and often get in and out several times instead of just holding for the whole duration of the setup.

I don't necessarily have more trades in live than I do while paper trading though, because I also don't act on all of my entry signals due to second guessing.

The best occurrence of my setup happens about once a day or every other day. I told myself several times I should just trade that setup, but get bored waiting around for it after about 3 days of paper trading. Then I am eager to go try it out in Live -and always miss the entry signal! I am starting to think it's due to some sort of self-sabotage.

I am planning to devote this weekend (since it's suppose to rain anyway) to further (or better) defining my entry and exit signals in order to remove what you call discretion so that I can reduce my constant second guessing.

This week during live trading, my second guessing has caused me to constantly miss entry signals, chase, enter late and get stopped out of trades, that should have been profitable, at a loss. In paper trading my losses are smaller than my wins, however, right now in live, even though my win to loss ratio is 1.6:1, my average loss is $106 and my average win is just 37 dollars!! For some strange reason I am willing to take the losses but jump out as soon as I have a penny to my name.

Thank you kindly for your suggestions, much appreciated.

You are describing my behavior to a tee!!! I have been trading my method mechanically for over 2 years now, that is the only way I have been able to overcome those behaviors. I have tried this experiment a few times where, while trading my mechanical method, I will try to take a couple of live trades on a different instrument solely using my own discretion, and low and behold, I start exhibiting the very same old behaviors on those trades. So for me, it is apparently a deeply rooted personality trait, that probably would need years of therapy to conquer, but fortunately a mechanical method has been able to keep in check.

I don't know your trading method, but given the fractal nature of markets, you may be able to get more signals using the same method by going down to a smaller time frame, and be able to get more trades during the day. My method uses range charts, and I can trade various range chart periods, and get generally more signal on smaller periods, and fewer signals on larger periods. What I notice though is that larger periods tend to reduce the number of signals, but tend to make the signals more accurate, and vice versa for smaller time frames.

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  #94 (permalink)
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monpere View Post
You are describing my behavior to a tee!!! I have been trading my method mechanically for over 2 years now, that is the only way I have been able to overcome those behaviors. I have tried this experiment a few times where, while trading my mechanical method, I will try to take a couple of live trades on a different instrument solely using my own discretion, and low and behold, I start exhibiting the very same old behaviors on those trades. So for me, it is apparently a deeply rooted personality trait, that probably would need years of therapy to conquer, but fortunately a mechanical method has been able to keep in check.

I don't know your trading method, but given the fractal nature of markets, you may be able to get more signals using the same method by going down to a smaller time frame, and be able to get more trades during the day. My method uses range charts, and I can trade various range chart periods, and get generally more signal on smaller periods, and fewer signals on larger periods. What I notice though is that larger periods tend to reduce the number of signals, but tend to make the signals more accurate, and vice versa for smaller time frames.

Oh thank god I am not the only one exhibiting this crazy behavior.
I don't get it. The behavior makes no sense post-market, but still I repeat it the next day. It's not like I don't know better.

Yes, I do get more signals on the smaller time frame, which is what I am trying to trade now, however it also gives me more of, what I like to call, "false positive" signals, which increases the desire to cherry pick.

What do you mean by "mechanical" method?

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  #95 (permalink)
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TriggerShy View Post
Oh thank god I am not the only one exhibiting this crazy behavior.
I don't get it. The behavior makes no sense post-market, but still I repeat it the next day. It's not like I don't know better.

Yes, I do get more signals on the smaller time frame, which is what I am trying to trade now, however it also gives me more of, what I like to call, "false positive" signals, which increases the desire to cherry pick.

What do you mean by "mechanical" method?

For starters, stop SIM trading. After a certain point, it's counterproductive to your trading growth curve.

Don't find solace in the fact that there are others that make the same mistakes as you do. That very salient fact should make you feel worse not better. Work on differentiating yourself from them- this is not a support group. Once again, a very counterproductive way to think.

What's a "false positive" by-the-way? Also, counterproductive to how you approach trading, because it presupposes that the market should do something. The market never fails to do anything - you or your signals were the ones who thought it should move one way- and you were wrong. Take your loss and get over with it - you're not always going to get it right.

You are getting out of your winning trades too early, because it makes you feel better. Stop doing things that make you feel better, and do things that will make you money.

I know what I said is not going to make you feel better, but it will make you a better trader.

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  #96 (permalink)
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TriggerShy View Post
Oh thank god I am not the only one exhibiting this crazy behavior.
I don't get it. The behavior makes no sense post-market, but still I repeat it the next day. It's not like I don't know better.

Yes, I do get more signals on the smaller time frame, which is what I am trying to trade now, however it also gives me more of, what I like to call, "false positive" signals, which increases the desire to cherry pick.

What do you mean by "mechanical" method?

Mechanical trading is trading using a strict set of rules. Rules for entries, stops, exit, trade management. There is little or no discretionary aspect in this approach. Basically all the discretionary decisions you would normally make during trading, have been incorporated in the set of rules of the method. So, you are not cherry picking trades, you are taking every trade that meet all the rules. You are expecting a certain percentage losing trades based on the method's calculated expectancy.

Everything is systematic, trades are entered the same way every time, and managed the same way every time. Every rule has been derived and tested through historical analysis, and proven to make money historically. Then, you just need to rely on the mehtod's historically calculated expectancy (win/loss percentage and average win/loss size) derived through backtesting or sim testing, and that should keep the method profitable. That's the approach that has worked for me.

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  #97 (permalink)
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Month-end Summary

Trading Summary for July 2011:

I started trading LIVE again in the last two weeks of July, so even though I ended the month in red, I am happy that I finally (and again) overcame what ever psychological blocks I had about pulling the trigger. The "tuition" I had to pay for these roughly 20 trades is well worth it, considering I hadn't had the guts to take even a single live trade during May and June.

My fear is not completely gone, as I still ignore the majority of my signals so I still have a lot to work on.

----------------------------------------

Total P/L: -$350

Win %: 61


----------------------------------------
Focus for the next month:
  • Further define my entry and exit triggers -remove ambiguity
  • Enter on every signal -document reasoning for all missed signals
----------------------------------------

Thank you all for your comments and suggestions, if I haven't responded to your posts yet, I will do so in the next couple of days.

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