Revenge Trading

[mule1976 10]

Hi all,

 

I have been trading off and on for a few years now, and have not been profitable, but I feel like lately I've making some progress and improving except for one big problem. If I have a few losses in a row, I NEED to get that money back, and won't stop trading until I do. As you can imagine, I start to take trades that don't fit my system, start trading larger size, etc., making back some of the money, then losing that and more. I guess this is what some call revenge trading, or trading on tilt.

 

Last week this happened again, and I had my biggest losing day ever. This has only happened the last 6 months or so of trading. I think it's because I haven't been improving as much as I think I should be, and want to prove to myself I can make money. A few times it was because I fell below $25,000 and wanted to make back the money to avoid margin calls (stupid I know, and yes I am undercapitalized).

 

This is so frustrating, because when I do this, 95% of the time I end up losing more money, but I can't seem to stop myself from doing it. Then I can't really evaluate my set ups, because I end up taking so many sub par trades that don't really fit my rules.

 

How have you guys dealt with this problem? In the past, I have stopped trading and gone back to paper trading. Of course this never happens when I paper trade, and I am able to make money. I know I need to be focused on the process and not the money. But it's not easy. Any ideas?

 

Thanks,

 

Ben

[Soultrader 12]

In order to overcome this, a buddy of mine trades 1 semi-automated strategy on a daily basis. This has allowed him to trade without emotions. My first year I went through the same mistake of having my emotions take over my actions. To overcome this, I spent alot of time reflecting on my own personality and discovering many bad habits that I possessed. From then it was a gradual process of fixing these traits and also admitting to them.

 

Having a sound strategy that you are confident with will eliminate the necessity to place trades that do not fit your style. Having a solid trading plan will also assist in this process. Perhaps you may want to take a step back and paper trade for some time to build back your confidence as well as discover strategies that you would want to take. Eliminate the noise. Hope this helps.

[DugDug 10]

ditto - factor something into your plan of how to deal with this - eg; walk away. turn off the computer.

 

Another one is implement a checklist that you physically tick off before doing a trade. And actually read and ask yourself is this a revenge trade - if the answer is yes - dont trade.

All you are trying to do is introduce muscle/brain memory to avoid these situations.

[bakrob99 11]

Hi all,

....This is so frustrating, because when I do this, 95% of the time I end up losing more money, but I can't seem to stop myself from doing it.....

Ben

 

Welcome to the world of learning about yourself. Most traders have had to deal with this issue and ultimately for me, it boiled down to fully realizing and understanding that I would never achieve the success I very much wanted without the discipline to trade my plan according to its rules and not my emotions.

 

You need to reflect long and hard on what is behind this behaviour.

[rs1 10]

A couple of ideas for you to think about. These are things which helped me but everybody is different.

 

Give yourself a max loss per day and make it a percentage of account or absolute number that you are comfortable losing. If you hit that number, even if it is in the first five minutes of trading, switch the computer off and get up.

 

Allow yourself to only make one trade per day. If the trade is a winner, great, if not then take the loss (which again should be an amount/ percentage you are comfortable losing) and take the rest of the day off.

 

These obviously require a certain amount of self discipline to enact. They should help improve your mindset if you follow them, as they try to get and keep you in a positive mindset by not trading too much and by not letting your losses get out of hand.

 

Again, just a couple of ideas, everybody has a different way of approaching things.

 

Best of luck

[FXGirl 10]

Dear Mule1976:

 

Would you mind giving us more information? In answering questions 4, 5 and 6, please don’t try to give a logical or rational reason, just give us what you are saying to yourself about this.

 

1. “I have been trading off and on for a few years now, and have not been profitable…” Please tell us why you haven’t been profitable and if you trading with a system you know works? Do you have a written trading plan?

2. “I feel like lately I’ve been making some progress and improving…” In what areas have you been improving? What is responsible for the improvement?

3. “If I have a few losses in a row…” How many losses or amount of money lost triggers this behavior?

4. “This has only happened the last 6 months…” What changed in the last six months with you, your situation, or what people are saying about your trading?

5. “I think it’s because I haven’t been improving as much as I think I should be….” What is your thinking about how much you should have improved or where you should be in you trading career?

6. “….and want to prove to myself I can make money” Please say more about this.

 

I know that some of these questions may be pretty personal, but if you are willing to share this information, maybe we can help you unwind the “I NEED to get that money back” so you can stick to taking trades that follow your system.

 

There are some good suggestions on this thread already. Any that resonate with you?

 

Best Regards

FxGirl

[maxima 10]

ditto - factor something into your plan of how to deal with this - eg; walk away..

If he could walk away he would.. but then why is he asking?

 

buy yourself a trained monkey. when the chimp see -$5000 anywhere on the screen he beats you bad so you have to run away for day or two

 

I am sure you will find this expense very worth to make.

[DugDug 10]

maxima - i think a very simple example of walking away might be cheaper, easier, and less painful than a trained monkey.

its the same advice - give yourself something (a trick, a trigger, a trained response) to avoid the errors - and why not try something simple first? sometimes its not that obvious and there is no need to discount the obvious.....unless of course you like to make things more difficult than they might need to be.

 

I am sure FX girl will help him out, she is very good at offering more detailed advice.

[mule1976 10]

Hi FX Girl,

 

Thanks for your reply. Here are my answers to your questions:

 

1. “I have been trading off and on for a few years now, and have not been profitable…” Please tell us why you haven’t been profitable and if you trading with a system you know works? Do you have a written trading plan?

 

I have changed my system a few times and for sure in the past, I had no idea whether what I was doing worked because I never tested it. My current system I have profitably paper traded for a few months and feel like I have something to build on. But I admit I need to be way more specific in my rules, and then actually write down my plan and refer to it as I trade.

 

2. “I feel like lately I’ve been making some progress and improving…” In what areas have you been improving? What is responsible for the improvement?

 

I think it's been a process of studying, seeing how other people trade in these forums, and getting better at pattern recognition.

 

3. “If I have a few losses in a row…” How many losses or amount of money lost triggers this behavior?

 

Four losses is usually the point where it would start to happen.

 

4. “This has only happened the last 6 months…” What changed in the last six months with you, your situation, or what people are saying about your trading?

 

I think it's been frustrating to be profitable on paper, and feel like I am making progress that way, but still not seeing any results in live trading. Another issue is I me starting to get a bit fed up with my job, and seeing trading as a way to escape.

 

5. “I think it’s because I haven’t been improving as much as I think I should be….” What is your thinking about how much you should have improved or where you should be in you trading career?

 

I thought by now I should at least be a break even trader. I'm probably putting too much pressure on myself.

 

6. “….and want to prove to myself I can make money” Please say more about this.

 

Not sure on this one. It could be a self esteem issue going on here.

 

Thanks again for your questions, and to all who have replied to my post. I think going through them brought some stuff to light, things I need to work on, and some suggestions I can put into use.

[zdo 20]

Looks like FXgirl is in ‘Chicago’ , so while we’re waiting for her to show up with some good guidance, I will post some REALLY bad trading advice on this topic for anyone who has to deal with this issue.

 

Ben, it looks like your edge development is still in flux… As the ‘edge – emphasizers’ (DBPheonix probably being the best spokesman for them on this forum) would say

When you’re edge(s) are clarified many of these issues are simply non – existent…

 

And I’m not so sure if that is really a weakness that needs to be stopped or corrected! This is one of those issues the industry has a big blanket over the whole thing - 99 out of a 100 ‘coaches’ and ‘pros’ will tell you it is a no-no, and it’s always in the top 40 of all the trading tip lists. I’m thinking it’s much more individual specific and hopefully these posts will help readers formulate the impeccable individual questions to seriously ask and answer for themselves – the question really IS the answer...

 

… coming in as separate posts – because each of them are coming from a different perspective and are less, not more, related to each other… some will have value one day and have zero personal relevance the next day, etc… plus I can’t come back and edit / integrate them later – so we’ll just let each one stand distinct and on its own…

[zdo 20]

a creative (not rule or principle based) perspective…

 

First, after you have read and understood the rest of the book, of course, I would refer you to the Strategic Moments chapter of The Path of Least Resistance by Robert Fritz (2nd edition) … make these very situations you are talking about grist for progress…

[zdo 20]

a principle based perspective…

 

To set and work toward any goal is an act of courage. When we exercise the courage to set and act on goals that are connected to principles and conscience, we tend to achieve positive results. Over time, we create an upward spiral of confidence and courage. Our commitment becomes stronger than our moods. Eventually, our integrity is not even an issue. We build the courage to set increasingly challenging, even heroic goals. This is the process of growth., of becoming all can become.

 

On the other hand, when we exercise courage in setting goals that are not deeply connected to principles and conscience, we often get undesirable results that lead to discouragement and cynicism. The cycle is reversed. Eventually, we find ourselves without the courage to set even small goals…

 

The power of principle-based goal setting is the power of principles- the confidence that the goals we set will create quality-of-life results, that our ladders are leaning against the right walls. It’s the power of integrity- the ability to set and achieve meaningful goals regularly, the ability to change with confidence when the “best” becomes the “good.” It’s the power of the four human endowments working together to create the passion, vision, awareness, creativity, and character strength that nurture growth.

 

…… to create the upward spiral that empowers us to continually put first things first in our lives.

First Things First Covey, Merrill, Merrill

[zdo 20]

‘skills based’ view

 

“Motivation is the assessment between two consequences.” Eric Cobb

 

begin to dig: Motivation as Skill: a Functional Definition of same

[zdo 20]

Caveat: This is where many, if not most, will consider this bad, “off the reservation” advice

 

 

Flip it! Any time mind is focused on avoiding what it fears or judges to be negative, it simply cannot create the questions needed to properly adapt!

 

Could the practice of trying to find WHAT’S WRONG and fix it actually be WHAT’S WRONG ?

From what could be loosely labeled as a strength’s based approach, where ‘weaknesses’ are not rated with negative ‘numbers’ but start at zero and really, experientially come to mean ‘little strengths’ – budding strength lies in this condition you are experiencing, but it will not unfold if you only find problem ‘solution’… this is an effective, but not easy, part of building the proper ‘total responsibility / can’t lose’ grounding …

 

I noticed when I played tennis (or b-ball, cards or whatever), many times I found myself behind. Instead of quitting for the day, I learned to narrow my focus to specific aspects of my game (that weren’t score related btw) and tough it out. And even when I didn’t find a way to win, at least I found a way back to effortless high performance. I had always had no trouble transferring inner skills gained from trading to help in my other games. I realized this was an opportunity to transfer some of my other game skills back into enhancing my trading performance. I learned to play from behind.

 

Not to say there aren’t days when I shouldn’t just STOP! But those days need recognition points that aren’t based on the bottom line or ratio of most recent W/L’s … Now when I find myself smack up in one of the situations you’re describing I am at choice to synch up and play even more mistake free.

 

It took a lot of work to get where circumstances did not determine state, (and to where I could quickly recover when I had slipped and let ‘circumstances’ determine state) , to where opportunities were not passed on because of recent results, and to where in adversity I stayed ‘loose’ but increased focused on the present game at hand (instead of taking uncentered ‘revenge’ flyers, etc etc.)

[zdo 20]

want MORE badd trading advice ?

see ‘the fetters of Budhism’…. :haha:

[zdo 20]

probability “thinking”

 

To the degree that we are out of synch with the current conditions and direction of the market, we must ‘pay up’ to stay with the market. …( this applies to all decision sourcing – discretionary to automated btw)

 

Mark Duglus. talks about learning to functionally “think in probabilities”. Personally I had to take that a whole lot further - like freaking whole re- pigmentation, not just paint or a top stain – and totally surrender to probabilities at levels way beyond cognitive. In synch out of synch no matter – I had to totally surrender to staying with the market. Sometimes this means paying a pretty steep price and accepting some deep pain.

 

…and, btw, screw the ‘biometrics’! 9 out of 10 feedback experts might check ‘revenge trading’ on their limited multiple choices. Rather, personally, make it really directed work on accepting the costs of being out of synch and then focusing on getting back in synch…

regardless of your peptides in the moment...

[FXGirl 10]

Hi, Mule1976

 

Lots of family things happening for me lately – sorry for the delay in responding to your post. I’m back from “Chicago” now. Thanks for taking the time to answer all my questions.

 

1. I’m sure you know that the first thing I’m going to suggest is that you write down your criteria for entering, exiting, setting stops, and taking profit. Trying to trade without this is a little like being in a foreign country, asking for directions and getting an answer in a language you don’t understand accompanied by a vague wave of a hand in the general direction – you’ll be extremely lucky if you get anywhere close to your destination.

 

Part of the reason this is so important is that you are creating a pattern-recognition lens through which to view the market. Your success depends on your ability to recognize this particular set of circumstances/pattern and take advantage of it. The writing of a trading plan forces you to move your implicit knowledge of this pattern(s) to an explicit level. Becoming an expert trader is an extension of this process. Over many years, a trader recognizes increasingly more complex patterns, first at an intuitive, subconscious level, then at a conscious or explicit level.

 

2. You’ve mentioned that you feel you should be farther along with your trading skills, a break-even trader by now, and that you are feed up with your job and see trading as a way out. That’s a lot of pressure to put on yourself, but I can understand why you might feel that way.

 

For now, let me suggest that you develop a plan for reaching your goal of making your living from trading. Let’s start with the technical skill/activities set you will need. Make a list of the skills you will need in order to be profitable and how long you think it will require to obtain these skills, or completing these activities. Examples might be completing your trading plan, finding a money management system that best suits your trading strategy, Next, let’s do the money: amount of money you need to live on, what capital you have for trading, what percentage of profit you can reasonable expect to make over a given period of time, how this will change and over what period of time, and any other pertinent factors. Please take the time to write this out. If you do so, you will have a different feel for the process.

 

Where I’m hoping this will take you is to a recognition that making trading your sole source of income is a little like getting a PhD, it doable, but it is definitely a one-semester-at-a-time procedure. Having a clear road map can help you be less judgmental and more relaxed about where you are on the learning curve.

 

3. Because when you have about four losses in a row, you act out your feelings of frustration, etc., let me suggest that for the present, once you have three losses in a row, you call it quits for the day. What we are trying to do here is avoid the stimulus that triggers the destructive behavior until we have other strategies for handling this circumstance in place.

 

4. Creating a space: It’s easy move straight from feeling to action. What we want to do in trading is create a space between our emotions and the resultant behavior, i.e., between feeling we are being left out of a move and impulsively taking the trade. There are two important reasons for this. First, emotions are information (data) about us, NOT ABOUT THE MARKET. And, second, emotions are constantly in flux and change rapidly. If we can stop the action, even for a moment or two, then we have a chance to examine our feelings and the inner dialogue that accompanies them, and we give our feelings time to change.

 

I’m going to make a distinction here between the intuition or gut feeling of an expert trader and the emotional responses of fear and greed in all their nuances. True intuition is implicit pattern recognition making itself known, and it feels different that other emotions. It can be subtle like an itch trying to get your attention, or it can be a full-blown knowing what will happen next. But it is not about all the other stuff traders feel.

 

Most impulsive trading actions, such as jumping in or out of trades, are strategies for relieving the discomfort of the emotions the trader is experiencing. Using the example above of feeling left out of a move, once the trader has jumped into the trade, those feelings go away and there is a sense of relief. (Of course, these feelings may be quickly replaced by another set of emotions if the trade goes badly.)

 

Let’s start by collecting some more data and building some new strategies:

 

• First, when you are not in front of the charts, write down what emotions you were feeling and what you can remember saying to yourself just before, and during, the time that you were taking your revenge trades.

 

• Next, when you are trading, practice taking your emotional temperature. Every 5 to 10 minutes, write down a couple of words about what you are feeling. Use a timer to make sure you do this. The purpose of this exercise is twofold: becoming more aware of your feelings and elucidating their content.

 

• Here is a link about diaphragmatic breathing. [ame=http://www.youtube.com/watch?v=xIwZsmOZtzE]YouTube - YOGA FLAVA Deep Diaphragmatic Breathing[/ame] If you don’t like this one, there are plenty of others on YouTube. Please start practicing this techniques 3 to 4 times a day for at least 5 minutes. You can do this in a sitting position as well as lying down. The reason we are doing this because the fastest way to calm emotions is to calm the physiology. With practice, you teach your body to calm down very quickly when you use this breathing technique. A calm physiology and high emotional charge are two incompatible and mutually exclusive states.

 

• When you are aware that you are emotionally uncomfortable, say, “This feeling is just information about me, not about the market.” Keep saying it until you feel more relaxed.

 

That’s enough for now. Please report back about your experience with these suggestions.

Edited April 19, 2010 by FXGirl

[mule1976 10]

Caveat: This is where many, if not most, will consider this bad, “off the reservation” advice

 

 

Flip it! Any time mind is focused on avoiding what it fears or judges to be negative, it simply cannot create the questions needed to properly adapt!

 

Could the practice of trying to find WHAT’S WRONG and fix it actually be WHAT’S WRONG ?

From what could be loosely labeled as a strength’s based approach, where ‘weaknesses’ are not rated with negative ‘numbers’ but start at zero and really, experientially come to mean ‘little strengths’ – budding strength lies in this condition you are experiencing, but it will not unfold if you only find problem ‘solution’… this is an effective, but not easy, part of building the proper ‘total responsibility / can’t lose’ grounding …

 

I noticed when I played tennis (or b-ball, cards or whatever), many times I found myself behind. Instead of quitting for the day, I learned to narrow my focus to specific aspects of my game (that weren’t score related btw) and tough it out. And even when I didn’t find a way to win, at least I found a way back to effortless high performance. I had always had no trouble transferring inner skills gained from trading to help in my other games. I realized this was an opportunity to transfer some of my other game skills back into enhancing my trading performance. I learned to play from behind.

 

Not to say there aren’t days when I shouldn’t just STOP! But those days need recognition points that aren’t based on the bottom line or ratio of most recent W/L’s … Now when I find myself smack up in one of the situations you’re describing I am at choice to synch up and play even more mistake free.

 

It took a lot of work to get where circumstances did not determine state, (and to where I could quickly recover when I had slipped and let ‘circumstances’ determine state) , to where opportunities were not passed on because of recent results, and to where in adversity I stayed ‘loose’ but increased focused on the present game at hand (instead of taking uncentered ‘revenge’ flyers, etc etc.)

 

Thanks for this. Could you talk more about what kind of 'work' you did to get to where you're at?

[mule1976 10]

FX Girl,

 

Many thanks for your help. I haven't had a chance to implement your suggestions yet as work has been extremely busy, no time to trade. Will let you know how I do.

 

Also, for anyone else having the same problem, I use the LightSpeed platform, which I just found out has a dollar loss limit I can set for my account, something to protect your capital until you can get your emotions under control.

[zdo 20]

Thanks for this. Could you talk more about what kind of 'work' you did to get to where you're at?

 

 

Mentioned many of these areas of work in this cluster of posts.

 

On a very important level the work was getting to where I embodied the understanding that my spirit will not invest in or abide in compromise…Mind, body, maybe even soul, will – but not “my” spirit…

 

Close to that level, it required a lot of ‘clearing’ – trauma clearing, energy clearing, …his methods aside, Eckhart Tolle does as good a job as anybody else describing this stuff in modern western verbiage…

 

Pragmatically, the work was racking up the hours learning to put myself right back into those same very painful situations until I ‘got’ it. Behaviorists would call it self behavior mod, desensitization, etc… but I know I certainly didn’t experience it in those terms…a therapist might say I had gotten really proficient at ‘just right distancing’, etc. … but I know I certainly didn’t experience it in those terms…Btw, I personally made many ‘mistakes’ along the way in this regard – sometimes taking on too much perceived pain, sometimes taking it way too easy (“…if you’re comfortable, you’re not going fast enough” Mario).

 

Some areas of the work can’t be mentioned because I am now, unfortunately, out of touch with them. Now it’s just a story - “Success [and failure, brackets mine] kill knowledge” I could try, a Soros could try, a street derelect could try - but none of us could really verbalize or prioritize the real serial and parallel, etc factors that got us where we are…just stories.

 

You can get valuable tips and tricks from others – but the real work is all yours. Keep searching for the ‘right’ questions – the question is the answer. hth

 

“Nevermind you can't walk into the same river twice. You can't walk into the same river once!”

[zdo 20]

[ame=http://www.youtube.com/watch?v=1_XLud78dLE&feature=player_embedded]YouTube - Larry Williams What It Takes To Be A Winning Trader[/ame]

[Uli Schmuli 10]

I've been asking myself whether or not to respond to this thread. The reason I hesitated is because I've tried to help so many traders (literally hundreds) and my message to them was rarely heard, if at all. Call me jaded, but it seems pointless to me to try to help traders anymore if they don't have a trading plan. Here is the message:

 

YOU NEED A TRADING PLAN!

 

Without a trading plan you are destined to remain a loser, and risk losing everything - your money, your house, your relationships - everything. Without it you are a gambler, and probably an addict.

 

Your primary question at this point should be "How can I create a good trading plan?" Once you have a good trading plan, then your original questions become relevant. Without a trading plan, I wouldn't even try to address those questions. It's pointless.

 

Please understand that my strong language is for emphasis only. Call me jaded or arrogant if you like, but I know that most 'traders' do not have a trading plan. Develop one, and then you at least will have a chance at being successful.

 

I do welcome responses from any 'successful' traders who disagree with the idea that you need a trading plan. I find them amusing.

[patrader 10]

If you are serious about daytrading for a living then you must first have enough savings to live comfortably for at least 3 years while you learn this business.Then quit your current job and become a full time in training trader. Learn to trade the futures which don't have the $25,000 pattern day trading requirements.Realize that it will take much longer than you think to become consistently profitable.Give yourself plenty of time to properly learn this business.You must fully commit yourself to this business or you will be eaten alive by those that have put the time and effort in.Every year you will improve and strengthen your trading skills.The learning curve is steep but if you dedicate your life 100% to trading for at least the first couple of years you will see results.If you want to shorten the learning curve skip all the indicator learning and go straight to learning everything you can about pure price action trading.Don't trade real money till you have observed a market full time for at least 6 months, better yet a year or longer.Learn this market's behavior in all different market conditions.Be able to know what kind of market the day is developing within the first few bars of the day and have a plan on how to trade it profitably.Have the skill to recognize quickly after entering, that the market is telling you, that you are on the wrong side of the market and must either reverse or exit immediately.Develop the ability to think clearly when real money is involved.Start with 1 contract and trade it until you are consistently profitable.Don't average down.Then increase your contract size not the number of trades.Take your time and learn to trade correctly.You can't rush it.HTH

Edited May 2, 2010 by patrader

[mule1976 10]

Hello all,

 

I finally got the time to write out a trading plan (as suggested by FXGirl), so if you guy have any comments on it, please let me know.

 

1. Identify which stocks will be volatile for the day, because of news, technical reasons (violating major support, making new 52 week highs or lows, etc.)

 

2. Identify the main trend of the stocks and except for quick scalps, only trade in the direction of the trend.

 

3. Look at price action (hammers, inside bars, dojis, piercing lines) at swing lows/highs, support/resistance and moving averages at the 1 and 3 min time frames.

 

4. Enter on the break of the current candle, and place a stop at the other end of the candle.

 

5. Exit at break of previous candle, or at expected support/resistance.

 

Money Management

 

1. My daily goal will be $1.5 per share a day, and daily loss limit will be $0.70 per share a day.

 

2. After 3 weeks of averaging $1.5 per share, I will double my share size.

 

3. After 4 consecutive losses, I will close my trading platform and step away from the computer for 15 minutes.

 

Thanks everyone.

[amswak 10]

Hello all,

 

Money Management

 

1. My daily goal will be $1.5 per share a day, and daily loss limit will be $0.70 per share a day.

 

Is $1.5 per share per day an aggressive target (or not) for what you are trading? Do you ever vary this based on what the volatility and size of recent movement are in your trading time frames? I try to look at what to range of recent movements have been for a given security and adjust the size of my positions, profit targets, and stops accordingly for this.