Wednesday, August 13, 2008

Blow up

Well dear friends I had another blow up today. I lost about -20% today. Yes it's possible, it happened. I was like in March in self destructive mode, averaged a loser and that's it. I didn't pull brakes and made lower low in my account. Like before I believe that it's good. Why? Well the way that I trade doesn't work. So if this is the only way to stop doing it than be it. By that I don't think on scalping and taking small profits, trading of 10sec chart. Trading without stops doesn't work. I can go through same process 10 times again, build slowly and than lose control and lose everything build in one averaging session. I could today go out with much smaller loss, even with usual averaging that I do, but I think that I didn't want to do that. It wouldn't have an impact. Now when I don't know what to do next there is impact.

I always tell myself in similar situations that all what is needed is take a stop of max 20 pips and that's it. But with all comments from Orion, learning, I never go that extra mile. I suppress taking stops wanting to have 100% winning trading. That's ridiculous, but in few short words you can tell just that about my trading. I probably don't believe that I would be net positive with taking stops and don't want to face it if that is reality. I don't want to change methods, I don't want to follow rules. Well in the end this is result. We all hear about how 90% traders fail, well this is how it is when it's happening. I can't lean on averaging if I want t4l, so why even try to win anything with averaging and not taking stops?

Now I don't feel bad, I feel light. All that suppressing was on my chest and now when I had so big loss after suppressing all small losses that is so good. I felt that way in March also and after that I had 10 positive weeks. Well now I know that it's not a goal to be positive but to trade on proper way.

I don't know what to do next regrading trading, how to setup things. It's too early for that. I'm not in that usual quiting mode that people have when they fail big way. I got to accept that trading may never work for me and that there is no guarantee of success. That's also the thing that I suppress. I don't treat trading like a business with acceptance of the fact that it may fail. That is probably because I count on trading in my life to accomplish some goals with it. That's wrong. You can try, but you can't count and believe in guarantee. It's all irrational I know but those are the facts. Knowing that all is probably helping a little because I don't feel that I'm in a dark. On the other hand it doesn't solve things just by knowing what are the problems.

I'm tired of doing bad things, fighting. It would be easier if I could come to that all without the day like today. I feel like I write obituary. Well let it be one of bad trader. Maybe good one came out.

When it's all finished I feel puzzled why I need that big loss, why didn't I pull a brake earlier. I don't know. I can just guess like I did with this post.
If I can't trade on a proper way, for example with taking stops than it's really better not to trade at all. Just waste of money and time.

10 comments:

costar said...

You need to stop wanting to win 100% of the time. How often you win doesn't matter. You can win 40% of the time and still make money.

When you make a trade it isn't about being right or wrong. A trade can be the wrong trade if you make money and the right one if you lose.

Instead of thinking in terms of right or wrong trade, you need to think in terms of probability.

If you have a setup that makes money 70% of the time, that is a good trade. You'll lose money sometimes taking that trade, but if you cut those losers short you'll win in the end.

Hang this picture on your wall to remind you
http://stephenvita.typepad.com/alchemy/2004/09/kill_your_loser.html

FX said...

Yes costar it's true and thanks for comment. I know that but I'm still unable to implement that thinking in my life as a trader.

When I look at that picture in current state of mind it really mean something to me. Thanks on that also.

ORION MACHINE said...

I don't know how I missed this post but I did, so sorry to leave you hanging on this one...

First off, Costar nailed it. Every word he said is completely true.

As far as losing 20%... Hell I have done that and you can come back quicker than you think if you focus man. If you think 20% is like blowing up your account than I would say that you are trading too small to begin with. Let me explain. 20% is a number that just about any day trader should be able to produce in a month or two. If you are not making gains like that it may be because you are taking too little risk with your position sizing. That may be part of why you are trying to be right on every trade as well. If a winning trade represented less than 1% of my account I would feel like I am moving kinda slow. I know trading larger might sound like bad advice but try to understand it in the way I meant it. Also, your loss is relative. Its HUGE compared to your other losses so if feels like it will take forever to get back, thus your feeling like you've "blown up".

I too catch myself trading as if I expect to be right 100% of the time as well, but you have to constantly check yourself. When a trader gets too complacent, he is in danger.

You said that knowing the problem doesn't help solve it, I don't agree. Knowing the problem, THIS problem, is the only way to solve it. You are still above 90% of the traders out there because you KNOW the problem! To the others its "the markets fault". The thing that will guide you into the 5% who are profitable is to take action towards the solution.

On averaging: There is nothing wrong with averaging a trade as long as you have strong conviction about it AND are willing to give it up at a predetermined point. Only average if you INTEND to, and use a smaller position than usual so that your positions approximate your usual size.

About your beliefs: You can completely accept the fact that something may fail and simultaneously BELIEVE that it will succeed. Belief in your self, that you WILL succeed is of monumental importance. The only guarantees you have is that if you give up you will lose and if you stay the course you will win. It must happen. By the way, the reason you don't put on the brake earlier is because you still don't believe that anything can happen.

This is becoming a cliche' with me now but, remember this. If you put on a trade and then an infallible source told you "This will move 50 pips against you", how easy would it be for you to cut it right then and there? very easy. When you believe that anything can happen, its like having that infallible voice in your ear. You just have to come to believe it my friend.

costar said...

I know exactly how you feel because I've been there and I'm still working on it. Taking a loss sucks. I have my mental stop and I'll see the market hit it, but I hesitate and hope it will turn around. And the further it goes, the harder it is to take the loss.

Here are two things that help me. First is to forget about where you got in, it doesn't matter. If I'm short and the market is going against me I try to step back and objectively say to myself "if I didn't have a position on, would I put on a new short position here?"

Often that will make me realize that the short side only looks good because I'm short. The market doesn't care about how much you hope.

Second thing is to practice. Use Oanda's FXGame and practice getting stopped out. Before you start tell yourself your stop loss and target is 5 pips. Then flip a coin a take that side of the market. When it hits the stop or the target, exit the trade. Practice doing it instantly. Don't think about it, just click when you see the number.

Train yourself not to think about taking stops. Before you enter real trades, set your stops. Then taking that stop should be easy. No thinking about it, just a instantaneous reflex. Taking a stop is something you never think about when you do it.

ORION MACHINE said...

Costar, great words! I like how you state things. I have a few blogs on my page you might enjoy reading.

http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=285374439&blogID=381411192

http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=285374439&blogID=418102325

http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=285374439&blogID=422366059

FX said...

@costar
I think that I'm in the mood for practicing taking stops, so 5 pips s/l t/p demo is idea that I like. That doesn't solve all the things, and why I so much try to suppress all the losses but it's valuable to practice.

@orion
Well 20% isn't so bad I can get back but it's big kick in confidence because I put last 3 months a lot of energy in slowly building my account and than I throw all away in one day plus more. I interpret it as a bell that is ringing telling me that I need to change things. I wasn't listening before, but now bell rang laud enough.

ORION MACHINE said...

Last time I lost that big it was about 25% and I had some seriously mixed emotions. Part of me felt so silent, as if it was a turning point in my life(it was). I was just extremely quiet for the rest of the day. In that silence I felt a strange kind of peace for some reason. I was upset that I did something so stupid (averaging a loser 3 times then revenge trading) but at the same time I said to myself "I know how to make money, I can come back from this... NEVER do this again." It hurt so bad I never wanted to feel like that again.

It hurt my confidence a lot and I was ashamed of myself for a bit. But I forced myself to continue instead of quitting and thats when my trading really started getting more consistent.

FX said...

Thanks orion on sharing similar experience, it's somehow easier to hear about the same thing in others lives.

Anonymous said...

I always appreciate trader honesty when they screw up. It levels out the trading brain after seeing euphoria from traders on a roll. I wish more blow ups were posted online, to both scare newbies into trading rules, and encourage those of us who think we're in a slump that we're still green and should just take what the market gives us and shut up.

To the trader, congratulations on growing, on taking it on the chin and continuing forward. My only contribution is what you already learned, the hard way... use hard stops and profit targets. Keep going. The longer you wait after wrecking on a hurdle, the longer you keep wealth in the future.

FX said...

Well thank you on your comment. It's true, on the blogs there are always majority of good profitable trades posted. Small losers but no blow ups or mini blow ups. Well why hide, I can only get help and encouragement if I post it. It's all part of trading.