My latest thinking is that I'm totally wrong in my approach to trading. Now when I'm looking what is wrong, what need to be changed I see where is my attention. It's on the money and only on the money. I was watching some movie yesterday, one of the side characters was gambler that bet on horses. I just understand his motives. He's only thinking about a win and next win and all in terms of money. My biggest joy in trading shouldn't be how my account is now bigger for x amount of dollars than yesterday and than project it in to the future how long with current rate of return I will make millions or any other imaginary number. That's how gamblers think I believe. I never thought about myself as a gambler because I never bet in my private life, never go to casino. I'm too much risk averse and would never put 10$ on the table and spin the wheel. I just don't like probability of losing money and I'm also pretty much frugal in every aspect regarding money in my life. When I look at myself I think that gamblers aspect of me is that thinking about future big amount that I'm aiming to. I'm not in the now making whatever is my current size, but I'm thinking how would it be when it will all be ten times bigger. It's distraction and it's the force that direct my trading. When I'm approaching the stop loss level I got to move my stop because if I hit it I'm further away from my imaginary picture. I'm not thinking in that moment about what is right I just try to win on every trade. That fixation on future monetary level is so strong and integrated in myself that I don't even distinguish it. It's like my second nature. That is gamblers state of mind. He is not satisfied with himself and his situation in current moment but he thinks about how would it be. He is so strong glued to future projection in his mind that he can't live without it. His life doesn't have sense without it. All his actions are there to move him into that imaginary picture, it's so important that something banal as taking the stop or following the rules can't get in a way. Also he is so convinced that it will be achieved that no risk is too big. There is no risk in his mind because his projected picture for him is reality.
Odd thing is that in trading versus gambling with work you could change odds and put them in your favor so there is no need to gamble. Still it's so hard to trade as you would do any other job. Approach to trading should be of an painter that is painting the picture, he is not thinking when he start to paint about money, how much will he get for the picture. Problem with trading is when you tend to think about assets in your account and amounts that you win or lose as of your money. It's hard not to, but that is just inventory that you are moving around selling and buying. It fluctuate. It's not your income, it's not in your wallet. With money in your account it's ok to do things that you would not do with personal money like lose it on a stop. That is approach that people call treat it as a business, than you treat the money as inventory and not the money. I can't do it yet.
When we trade we talk about discipline and rules. It's funny that we don't think about what is that power that impel us to stray away. I believe that all action regarding changing the way how I should trade and what rules I should follow will fail in the end if I don't address that issue. I can practice taking losses, risk this amount or other, do whatever but day will come when things will just burst and damage will be done. So I'm not in the mood right now after that just happened to start again on a wrong way again. There is now sense in building a house if foundation is not in place. We all rush in our trading life and never look what approach is needed than after few years we face reality that things are not going well. Right now I got to work on foundation because I know that I will fail without it, I'm failing already. Can I transform my thinking and with it my approach to trading from get rich (quick or slow) to right one we will see.
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14 comments:
Fx you are making more sense than ME ;))
I really love the posts and the dialog between everyone, would you mind if I posted all of this in a blog? I think it is valuable info and would help my readers.
I think you nailed your own diagnosis perfectly my friend. You are not failing at all, you are simply getting closer to your goals.
Thanks orion, I appreciate it. Sure, post it no problem, put in a link to here also to share some readers ;))
I consider you as a guest poster here anyway :)) I appreciate that also. Blog is better and my trading, but there's long way for me.
Well I got to try to give best I got, trading is part of my life so it's like every other aspect valuable and important. Currently it's part where is most of my attention and where I need to fix things.
Yes, everything is in diagnosis, when you get that completely problem just drops on the floor like mature apple, nothing else is required. But as you see I'm dealing with strong emotions and view of the world.
"When I'm approaching the stop loss level I got to move my stop because if I hit it I'm further away from my imaginary picture."
I found that interesting. What's your success rate on trades that you move the stop on compared to trades that work right away?
If a trade is approaching your stop try to think that probability of the trade working is going down.
You can't undo trades. If it's going against you don't try to fight to make it work, just say "this trade is a loser, I'm getting rid of it before it costs me more money"
It's like going to a new restaurant and the food is bad. Don't keep ordering food and giving them money in hopes you'll get an amazing meal. Because 90% of the time you'll just have less money and feel sick. Just pay for the bad meal (take the loss) and leave.
Two months ago I did some sort of looking back over my trades and found out that nothing past -20 is worth holding or averaging and a lot of trades came back before -20 at least to b/e. So for me it would be good as capitulation point, but I can get out earlier if I want. When I look at things like that there is no real need for averaging. But can I just do that, exit at -20, not average down we will see.
When I start doing some trades all my attention will be on how I feel regarding discipline. If I see that I want to do "wrong" things I will stop and go back to contemplation faze. I'm not any more in the mood of must make money, must make profits. But we will see following days am I clean or not regarding that.
Everything is simple if I can follow it, max stop -20 and that's it. No need for any reasoning around it. If I can't follow that simple rule than...
FX, good honest soul searching. I don’t know the specifics of your trades, so maybe I’m way off here.
The first thing that strikes me is that no one should never place that much of their account at risk over a one or two day time span. It’s just NUTS. It’s human nature to overestimate our own expertise, and trading is no different. Try turning down the confidence level on the individual trades. If I plan to make 100 trades this month and I'm not very confident in my trading ability, how much capital should I risk on each trade? 5%, 1%, 1/2%.
There are at two pieces to the risk puzzle. Control the risk to be as small as possible and then ACCEPT that risk.
Entering a trade and placing a stop loss exit controls the risk, but doesn't mean you have accepted that risk. Take a moment at each trade and actually visualize the stop as already hit and the money as being already lost, really see the money disappearing down the john or going up in flames, whatever makes it more real to you. After you accept the risk on one trade, then accept the risk for a month of trades, a quarter etc.
Great blog.
Fx, without patting my own back, you are lucky to have such a great bunch of experienced people responding to your posts.
I appreciate the permission to share and I will of course put a link in for you ;))
Also, what Costar said about "When I'm approaching the stop loss level I got to move my stop because if I hit it I'm further away from my imaginary picture." My wife and I read that and found that quite interesting as well.
I had no means of wording a response to that as perfectly as Costar, so I am glad he spoke about it. It is good that you have looked back and determined that cutting it loose at -20 pips is a solid number. What I will than as is; coupled with your own success rate, what would you say is an ideal average win for you? How long should you hold a winner to come out net positive Vs. the amount you are willing to lose?
@ MarcoA thanks on response I really appreciate so big support in stressful moment like this. I usually don't risk that much, but I'm guilty of sin of averaging and not respecting my original stops. This time I was sick and tired again in one averaging session and I said go back or kill me I don't care. It was like some sort of capitulation. So the loss got so big. Before on few occasions it went to around 10%, too big also. But that is reality of averaging.
I really like your break down of as you say risk puzzle. I really do not ACCEPT the risk and I skip around that step. Also I don't give attention to the fact that I do such cardinal sin. Thanks for that.
@4xkid
I understand your message to me and in your last blog post about the struggles. Having a plan is being in complete state of mind. By that I mean you accepted all chances, decided that you will do something whatever happens in the end and than just do it. No thinking around when things start to motion. Thanks.
@orion
I don't really know all that numbers because my trading is skewed with averaging so hard to say.
@all
You all are traders and know that when you are in the trade it's different state of consciousness. Not all what I think before I put a trade is valid after. It would all be peachy if emotions component don't kick in but it does. So all good advices are really good any I feel kind of stupid being not able to implement them. The thing is fight is on a psychological level and rational thinking is not enough. I appreciate all the help and I'm grateful for it.
Yes, knowing and doing are not the same –a big gap can develop between the two. I find it helpful to duplicate exactly all my trades in both a demo and live account with same broker, starting capital etc. In the demo account everything is done exactly per the rules, no exceptions. My focus in the demo is always that of a tester – I want to know what’s the worst that will happen if I follow the rules, I want the end of month statement to be a record of perfect rule keeping. Ideally I want to have the same focus in the live trades. It took a number of months to get my behavior in both to match up, but the temptation to diverge is always there.
On a minor note, it also allows you to see if a brokers demo platform behaves differently from live.
Well MarcoA that is really some self management. For something like that I never heard before. You really did what is needed for yourself. Thanks on sharing.
Just a thought, but maybe you should have a live person there who knows exactly what you should be doing... that way they can watch you and you can be accountable to them. Maybe a friend or someone?
Good idea orion but unfortunately no one is free in the morning to babysit me. I need babysitting, lol.
Great post FX and I am glad that you are able to identify your flaws. That is the first step and I believe you will make great headway.
After reading your post there were two comments from Reminisces of a Stock Operator (I'm paraphrasing here):
1.) There is no one that has tried to get the market to pay fr something for him. A car, boat, fur coat, etc. This never works as a man merely hopes and gambles.
2.) There was a Large heap of money in the front of me and I sprinted instead of walked.
There is a season for everything. One has to envision the future while doing what is necessary today to arrive at that future.
Good luck
Thanks on good wishes. I would like to trade from Bahamas, that's for sure ;)
Thanks 4x on offer but it's not for me. I don't need a system or a way to trade. I need integrity.
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