Canceling My Success

[darthtrader3.0beta 10]

Just to throw my 2 cents in along the lines of what Walter said..

Here is an excersise..think about how many hours you have spent reading, researching, looking for the entry to trades...Now contrast that to the time and research you have put in on the exit..

Or look at the trading literature..thousands of books on various entries, a little bit on stops and exits can be summed up as "make some money or get stopped out". Its kind of ammusing no one has ever bothered to write an entire book on how to exit trades. Its a strange bias that has come to us from the way we come to trading and the literature.

This is something I've just come to in my trading. While I feel I'm confident enough in my setups, my exits are most purely random and I need to do alot of homework in this area to get both sides of the trade more in line.

I think you can sum it as if you haven't done your homework on entries, you should be nervous when you enter a trade. If you haven't done your homework on exits..you should be equally as nervous.

[Kiwi 16]

Almost as soon as I thank you I now have to disagree with you. IMO, in the long term simple affirmations are a detriment. At best they are a waste of time. I know that flies in the face of all the common knowledge on the planet but...

 

Thanks for thanking me --- you can do it again for giving you something to think about. :doh:

 

I largely agree with you but I don't here because there are a couple of times when affirmations work (in my experience) and they are called to action by this approach.

 

1. When you say an affirmation in the midst of trading it pulls you to your forebrain (you have to recall it and say it out loud) so it pulls you away from carrying out actions generated by your emotions and conditioned responses.

 

2. When you say an affirmation and you get a "wrong" feeling at that time its an important affirmation because in some way you disagree with it. Challenging that and exploring it until you can say it without the feeling is one way to eventually (time, hard work) change a "belief." Said belief can just be an unexamined habit or some bad thinking.

 

3. Rehearsal as part of it will replace old patterns (see steenbarger etc).

 

So, its worth doing.

 

IMHO one of the (humbling) things about developing yourself through trading is that so much doesn't work the way you'd hope. You could do the affirmations and it mightn't work. And another time after achieving something else it might work. The trick imo, once one has an edge that can deliver without continuous tinkering, is to get the you part of your edge working.

 

I do note that I failed to say "do it during trading." I think that having scripts for various points in your trading process is one thing that can help (some) people a lot by keeping the brain working properly, focusing you on what you need to focus, and keeping you aware of patterns of error that you have exhibited previously.

 

 

One little thing at a time.

[BlowFish 10]

An aside, I dunno about affirmations but apparently visualisation has had pretty impressive results in tests. (All hearsay mind you)

[Kiwi 16]

Yes Blowfish.

 

Affirmations (for the reasons above and rational emotive therapy plus later cognitive work), disputation (ret + cognitive), and rehearsal (visualization etc as part of cognitive approaches including trauma therapies) have all become part of mainstream psychological therapies. They do tend to get mixed up with questionable new age and nlp approaches but the basics are there and they can work.

 

The talking out loud and listening for your stories has more to do with psychoanalytic work like Denise Shulls. There you are searching a little deeper to find out what is driving your incorrect actions.

 

One of the tricks is to remember is that one of the reasons there are so many approaches is that at any one time one approach may not work on you. Finding the right one / ones is part of the path to growth that trading provides us.

[evolved trader 10]

Brownsfan

 

Thanks for the great suggestions. You’re probably right, if someone was profiting off my system it would be a swift kick in the butt for me!

 

I’m uncertain of the approach I’m going to take yet. I may take a month to paper trade and build myself back up mentally. Because yes, I’m happy with the system I’ve developed. I just need to learn to have more trust and faith in my abilities.

 

Blowfish

 

I agree with you completely. It’s the fear of failing, of being wrong about my decisions that seems to hold me back. No big deal, its something many of you have overcome and I know its just a hurdle for me to overcome. Its a great opportunity. Hey, if it was that easy, 95% of traders wouldn’t lose money.

 

Walter

 

Great post! As I read your advice something hit me hard. Through June/ July / August I was making more money than I’d ever made before, not just in trading, but my entire life. Having consistent success focusing only on properly executing my system and having fun in the process. September / October / November have been the exact opposite, and my success has been minimal. With hindsight now I realize I’ve gone from being passionate about trading to chasing the dollars. I mean look at my post, my focus has been to earn X amount of money a day. When I was successfully trading I was just having fun and enjoying the process of trading with tons of passion. I can feel that has since changed. Thank you for allowing me to become aware of this.

 

Darthtrader

 

That is very true. Although in my case all entry/ exit/ target strategies are in place. I think Walter has really helped pinpoint my challenge.

Thank everyone

[walterw 10]

Just to throw my 2 cents in along the lines of what Walter said..

Here is an excersise..think about how many hours you have spent reading, researching, looking for the entry to trades...Now contrast that to the time and research you have put in on the exit..

Or look at the trading literature..thousands of books on various entries, a little bit on stops and exits can be summed up as "make some money or get stopped out". Its kind of ammusing no one has ever bothered to write an entire book on how to exit trades. Its a strange bias that has come to us from the way we come to trading and the literature.

This is something I've just come to in my trading. While I feel I'm confident enough in my setups, my exits are most purely random and I need to do alot of homework in this area to get both sides of the trade more in line.

I think you can sum it as if you haven't done your homework on entries, you should be nervous when you enter a trade. If you haven't done your homework on exits..you should be equally as nervous.

 

 

Yes, correct... Exits is a an important issue it MUST be resolved previously on putting in any trade... its so or more important than entries... actually on my system, the relationship between entry and stop will determine my risk and the relationship of my entry with my "technical exit" and "max range" of a move, will determine my reward... so you can see that my RRR is measured from my entries to my exits... be it positive or negative... a trader who only looks at entries can not trade on a professional and consistent way...

 

When you create a system you first focus on establishing entries first, wich is ok... that normally involves setup and specific timing rules... after that technical exit and technical stop must be established as well... this technical rules should establish your RRR eventually...

 

NOW.... the most important thing is the SPIRIT of the trade... what are you really looking for on a trade... are you looking to beat the market, beat the professionals, revenge from past errors, become fancy and excentrical on your methods... improvise perfection, proove to others that you are better than them, financial suicide, emotional exaltation... OR making your daily profit and enjoying in making it...

 

beleive it or not, this wrong actitudes can make the difference between having a good sound competitive method and a very bad aproach to trading...

 

So recaping : a technical method must have correct entries and exit rules that will give you a good RRR, you must have the correct actitude towards trading, and as we mentioned yesterday psicology is also important ( managing fear and greed on your mind )... cheers Walter.

 

Bump:

I've missed your posts Walter, hope to see more of you

 

 

Thanks Blowfish, I had been a little busy this year... cheers Walter.

[Bearbull 10]

So recaping : a technical method must have correct entries and exit rules that will give you a good RRR, you must have the correct actitude towards trading, and as we mentioned yesterday psicology is also important ( managing fear and greed on your mind )... cheers Walter.

 

There is lot of free info. on the Wyckoff regarding this IMO, infact Db has addressed this issue countless times, one only has to take the trouble to study the posts and Blog instead of waiting for new posts all the time;)

 

Also Vadym Graifer has done an excellent job providing over 30 examples on how to gain entry, establish exit points and manage the trade. However all this requires considerable effort in understanding how trades interact in the market place, constructing strategies/tactics to exploit these interactions, thorough testing etc rather than waiting for some signals like End of Rising Market, and lo behold! there is a downbar on high vol, professionals have entered the market or some line crossing the other or indicator is overbought or oversold:)

[BlowFish 10]

Not sure if I mentioned this before in this thread (feeling particularly senile today). Have you considered a spread bet or CFD account, or trading 50 Q's or SPY? (not sure what instrument you normally trade). Basically trading a small amount that is fairly inconsequential but a notch higher than paper trading.

[HAKUNA 10]

Not sure if I mentioned this before in this thread (feeling particularly senile today). Have you considered a spread bet or CFD account, or trading 50 Q's or SPY? (not sure what instrument you normally trade). Basically trading a small amount that is fairly inconsequential but a notch higher than paper trading.

 

Which markets yu trade and what methodology yu use?

[thehunter11 10]

I had a very similar problem ? It took me some time to get over it . Finally one day I said thats it just do it. Instead of playing not to lose much I played to win. This may sound crazy but for the first time I did not use a stop order ? I think what happens is just knowing that you have a stop loss subconciously was putting this background negativity in my trade it put me into some kind of fear mode that would not even let me enter the trade? I would freeze and not even put in the order. Now I trade to win. I am a Day trader so I use to put my stops way to tight I would end up getting stoped out with these small losses. Now I use a .99 cents stop I call it my insurance stop. I get hit on that very rarely. I have a very good trading plan that took me about 4 years to develope. Its all based on momentum off news. An example take a look at symbol-- HIG -- from Friday 12/5/08. I found this in a premarket scan for stocks with increased volumn. I put it first on my list . I bought it at the open at 9.63 . Volumn was cranking it was huge. Sold it at 15.11 at 3:48 pm . That is one of my exits letting it go all day and selling between 3:45 and 4 pm. It was a classic setup for me. It will be on top of my list again for Monday 12/8/08. I will help you get over your problem ? its very simple its called confidence if your trading system is good than just do it. Its your attitude that is the problem. Make an attitude adjustment that says I am a winner do it on every trade as long as you have a good plan you have nothing to fear but fear itself in the words of F.D.R. Again its this simple , GET OVER IT NOW!!!!!

[OAC 10]

There is lot of free info. on the Wyckoff regarding this IMO, infact Db has addressed this issue countless times, one only has to take the trouble to study the posts and Blog instead of waiting for new posts all the time;)

 

Also Vadym Graifer has done an excellent job

 

This is a thread about psychology, not entry and exit.

But let me digress a little here regard to the above, most of us are intraday index futures traders here looking at the 1 minute or 5 minute charts or similar tick equivalent, in my opinion, volume has little value in this arena other than the occasional spikes.

If there was value, I am sure Walterw or more people would have mentioned it.

If volume has value, don't you think John Carter and his partner, Hubert Senters would come up with a TTM-Volume-trend indicator by now ?

I think this is a great idea for a new thread.

Edited December 7, 2008 by OAC

[Bearbull 10]

Psychology regarding what? Read POST 31

 

Trading ofcourse, which is concerned with What? Entering a trade, managing a trade, exiting a trade, unless there is something more exotic missing here;)

 

As for volume, who is suggesting that it is the only tool required or necessary?

As for "most of us are intraday traders" wow, awesome;), what do yu think we do? go and study

"Trading the Wyckoff Way" thread and learn.

[Kiwi 16]

"unless there is something more exotic missing here"

 

You missed the most important, waiting. What one does in waiting and the quality of ones waiting sets up the entry, manage, exit quality.

[Bearbull 10]

"unless there is something more exotic missing here"

 

You missed the most important, waiting. What one does in waiting and the quality of ones waiting sets up the entry, manage, exit quality.

 

Precisely, waiting ie. patience and the ability to consistently apply the rules of one's strategy along with a sound trading plan, all come under developing the required trading psychology;)

 

Bump: Moreover without the initial stages of effort in developing a consistently profitable strategy, all the psychology and waiting is not going to get you anywhere. Might as well take up transcendental meditation

 

Bump: Moreover without the initial stages of effort in developing a consistently profitable strategy, all the psychology and waiting is not going to get you anywhere. Might as well take up transcendental meditation

[BlowFish 10]

Which markets yu trade and what methodology yu use?

 

Not sure if that was @me Edit..I see it was. Last two months the USD.JPY (though have a euro workspace setup too). I find myself drawn back to the indexes so FTSE in the EU morning session and ES once it opens.

 

I trade using S/R lines and price action. I noticed the FX seem to really strongly respect fib lines so I have been throwing on retracements to see if they correspond to my hand drawn lines. I was surprised at that to be honest.

[HAKUNA 10]

Not sure if that was @me Edit..I see it was. Last two months the USD.JPY (though have a euro workspace setup too). I find myself drawn back to the indexes so FTSE in the EU morning session and ES once it opens.

 

I trade using S/R lines and price action. I noticed the FX seem to really strongly respect fib lines so I have been throwing on retracements to see if they correspond to my hand drawn lines. I was surprised at that to be honest.

 

Thanks, I tried JPY and GBP.USD via forex after so many TG videos, but the volume bars all appear to be the same whereas GH reads all kind of thing in there:) so gave up, presume from your comments you trade currency futures, if so how do you find liquidity there, am thinking of subscribing to CME and which trading platform yu use to trade these instruments.

 

Yes I am led to believe that Fib numbers are widely used in the forex market, can become self-fulfilling if enough people trade with them:hmmmm:

[ChicagoTrader 10]

I was a floor broker way back when. We had a customer who would incessantly cancel orders if the price got close. We called it a "cancel if close" order or CIC. In a crowded pit, such orders were extremely frustrating and could lead to error for brokers, pit clerks, or even traders wanting to take the other side. But from the customer's perspective, sometimes the customer was really sorry he or she had canceled the buy or sell order when the trade worked.

 

I read through this entire thread and agree with much of what has been written. I'd like to add a few antiquated, but maybe applicable ideas.

 

OK, back on the trading floor, we never spoke of the dollars involved... maybe ever. We spoke of the number of ticks. So, applicable to forex, think of the pips. Make it into a game for yourself. Yes, you are going to make lots of pips.

 

What does thinking only of pips do? Well, it dehumanizes the game. You know that your

house gas bill costs $1,017.29 this month (if you live in a frame 110 year old house in Chicago, like I do). But if you lose $1,100.00 in a trade, you think, wow, I could have paid the gas bill with that. But if you lose 1000 pips, you might not think of it that way, because you'll make 2,000 the next trade.

 

Secondly, have you planned your trade? Even scalpers plan their trades. In the pit, they see a "handle" hit (a 85.00 or 86.00, etc.) and expect some resistance or support. The scalper might expect some paper to come in (public orders) or stops to get hit or lifted.

The scalper might know that someone was bidding or offering a few feet away, five ticks away. So, the scalper hits or lifts the paper, and quickly offsets the position with the trader a few feet away.

 

The scalper plans his trade, knows his parameters, and knows that he is going to give away the "edge" if the his held position starts getting away from him with another market maker.

 

So, even if you are trading a $500 account, you probably should choose your points of entry, exit, and method. My rule of thumb would be to never risk more than 1-2% on a trade, but plan to take 2.5-3 times that amount in profit. I try and experiment with different systems using a very small account so that I have "skin in the game". I make sure I am using money I don't "need" to pay the gas bill. And once I am fairly confident that my strategy works, I will move the strategy to an account where I have more "skin in the game".

 

Even as a pit trader, I was extremely conservative and risk adverse. I have not changed that.

 

All the best, Ryan.

 

Confidence: it's really all about that.

[Soultrader 12]

Hi Ryan,

 

Thank you for your insightful post. I was particularly enlightened to read your comments regarding scalpers. A completely different type of game comparing a scalper on the floor vs a scalper trading electronically.

 

On the floor, do how many ticks do scalpers usually aim for per trade? And how many trades a day do they make on average? How quick are they to get out of a losing position?

 

Any insights would help because I am working on applying some scalping strategies as well at key psych levels. Thanks.

[ChicagoTrader 10]

I don't pit scalp now. My only point was that there is a strategy and planning involved. The scalper generally tries to buy the bid and sell the offer. So a scalper generally gets out of trades very quickly. If a trade goes their way, the pit scalper may ride the trade for some time. To quickly get out of a losing trade, the scalper will "give up the edge" as soon as possible to liquidate the loser.

 

Since we are all probably numbers people, I will put it this way:

 

Let's say the market is 3 bid, 4 to 5 offered. The scalper tries to buy the 3s and sell the 4s or 5s, generally against paper (public orders give up the edge by buying the offer and selling the bid). If I buy 3's and all of a sudden, the market is 2 bid at 3, I will try to first break even by selling the 3s or selling the 2s (in the case of no paper, another local will be there). If a number comes out, I will go into it flat and wait to see what paper comes in. Customers using market orders is "great" for the scalper, it is their bread and butter!

 

 

There are many varieties of scalping. Most of the time I made markets against futures options paper, managing my "greeks" (I don't mean gyros). If paper came in selling some 50 calls at 3, I would try to pay 2. If the broker is not held, I can pay 2. I add it to my position and quickly approximate my delta. If I bought 100 of the 50 calls with a delta of .33, I will sell 33 of the futures in the adjacent futues pit. Now I will quickly subtract deltas and approximate the gamma (the rate of change of the delta). Now I need to sell some premium. (you figure out quanities in your head, generally, not with a computer) If the gamma is .25 I will look to sell another option (put or call) with a net gamma of -.25 (because I am short). Preferably I will do that against paper, but if I got a good edge on the calls, I might give up that edge (if my net on the whole 2 trades is still positive) to get neutral.

 

Then I worry about vega (call or put price change with respect to volatility), and I might wait until the pit calms down to find that out or get a clerk to do it for me. If I have accumulated too much premium, my portfolio will lose value because of time decay. So I will make sure that I am fairly neutral on the premium or slightly net short. An options "box" is entirely neutral, so I will net those out and write up a card showing my net exposure by strike. If you have a quiet time, you then work to make these portfolio adjustments. Very later on I might consider my net "rho", or my exposure to intest rates, as a function of being lent or lending money to my clearing house to carry my positions. (I wrote all of my own software to do portfolio stuff, btw, I am not some sort of antique!)

 

When in the pit all of these calculations should be done in your head, as there is no time to fool around with calculators, etc. A good options scalper or market maker can do matrix math in that trader's head. In a crowded pit you don't have the luxury of even moving, so you get it done as best as possible. You don't leave, sometimes even to go to the restroom. That is why in the movie "Trading Places", brokers "bolt" out of the bathroom stalls to get to the pit....

 

I was "always ready" to make markets for any paper that came in. As a member my transaction costs were almost nill. I wasn't executing the futures, so I paid out that brokerage to someone else.

 

It helps to grow up in the same neighborhood as a broker, go to the same grammar school, etc. This is why the floors were like old neighborhoods, a perpetual high school assemby when you knew throusands of faces. Because pit trading was so "visual" I almost never went downtown without at least recognizing someone. And I also generally recognized a lot of people on Wall St. or near the WTC (terrible outcome...) when I was in NYC, etc.

 

As the underlying market fuctuated, I adjusted my changing delta, gamma, vega and theta accordingly.

 

Elements of this lend themselves to institutional options trading in front of screens, too. What is different is that back in the pit, almost everything was a manual process. But as you didn't use the keyboard and screen as interfaces, I would argue pit trading was quicker and maybe even less error prone than screen trading for someone who knew what they were doing.

 

In the meantime, I am short Euros (forex) right now...... I am enjoying it!