What is the Single Largest Roadblock Standing in the Way to Your Trading Success?

[MadMarketScientist 11]

I've asked myself this question many times - and have also asked many others. What has been the single greatest challenge, roadblock, struggle, or hurdle that has either stood in your way - if you're currently trading successfully, or or is currently in your way and preventing your ability to get to the promised land? Which of course would be consistently profitable. I didn't say always profitable, but over any stretch of time you are showing profits.

 

I'm so curious about the replies, and I think a lot of people can learn from the answer to this, whether you're still struggling or already made it, that we'll make the "Post of the Week" the contribution to this thread that is the most thought provoking, or insightful, or maybe just entertaining (we all have our trading war stories!)

 

I can tell you personally for me perhaps my biggest struggle was not understanding over-optimization and curve-fitting. I would use software back in the mid 1990s that looked so incredible and I was already spending the money. Then, I would try and trade in real-time all of those "custom" settings and it was a train wreck. Whether it was the broker holding orders (this was before all the electronic trading today) or my optimizations were really just straight luck, never to repeat in the future it was a very difficult education and costly.

 

It also led to me developing some bad habits - also giving up way too soon when a strategy ran into some adversity - I constantly tried to "fix it" which meant more curve-fitting and more bad results in real-time. When I finally understood what makes a robust system, and what is acceptable loss vs. what is not, I was able to turn the corner.

 

I'm curious what you all think as well.

[SIUYA 11]

Me - or more importantly me trying to improve the simple things that work already to try and capture every little part of a move..... rather than just taking what the market gives..... the problem of trying to be a perfectionist.

[snowbird 10]

Was wondering if you planned to join the fun by starting your own thread. This should be a good one.

 

I would have to say that that my own personal beliefs and fears about the market are my biggest obstacles.

 

For example: right or wrong, I believe that any purely automated method of trading that I personally would be able to devise could work for a while (most likely during the test and development period!), but would eventually loose it's edge due to changing markets or unanticipated events.

 

This belief has ultimately led me down the path of studying price action, support and resistance, and the underlying auction theory that drives the markets, in search of methods that resonate with me personally.

 

My fear is that I won't be smart enough, confident enough, or emotionally strong enough to apply those methods in a profitable way over the long term, recognizing and adapting as necessary to the ebb and flow of the markets over time.

 

Until I can prove that to myself... I am only left with false beliefs, and unfounded fears.

 

snowbird

[AgeKay 10]

Watching the market in the morning to "warm up" and thinking this would be a great entry and this would be my exit and fucking nailing the top and bottom to the tick of every move like 5 times in a row and then I tell myself "Ok, now I am going to start trading to make some money" and the next few trades are losers and I have to trade the noon to make it back and the afternoon to make some profit. It's hard not to start hating oneself at times.

 

I am very good at picking tops and bottoms but I miss most moves due to hesitation and I then somehow manage to trade those few times that I am wrong. I wish I had something attached to my head that would recognize thoughts like "looks like a good entry/exit" and then just execute automatically for me.

[zdo 20]

Across time, the single largest roadblock standing in the way of my trading success was keeping losers too long.

Frequency of that mistake has thankfully dropped off precipitously in the last 10 - 15 years. These days, most of my systems have me out before the stop is hit , but some systems still have no stops at all. And on those I am occasionally still tempted to hang in with a loser, especially during long win runs... that fuzzy, sometimes ignored, and sometimes low-perceptible little line between confidence and hubris...

[TheDude 10]

I'm a bit similar to ZDO in what he says.

 

I always put a stop in in case of internet outage, PC failure or other technical issue or general disaster.

 

This is a bitch though because sometimes if I'm in a trade and it's close to the stop in stead of a quick exit at market saving me a few ticks, I think, well, I have a stop in the market so I may as well hold in case it turns.....It's only a couple of ticks.....

 

Of course, had I saved all those couple of ticks.....

 

I also start to think that if I do cover at market before cancelling the stop, it will also then get hit putting me on the wrong side, or if I cancel first, the market will move down that few ticks plus before I can put in that order.

 

I

[gandalf33 10]

I have one challenge only: I can't face losses.

 

Losses are killing me, a losing trade feels to me like a stab with a knife in the heart, while I have no problem losing at conventional games, e.g. chess, a single losing trade is something that puts me down. It's causing me so much pain that it's hard to express. I feel clouds darkening the sky of my mind after a losing trade. Like facing a huge block that you know will be almost impossible to get thru.

 

That thing is having a bazillion effects on me, all of them adverse:

1) my mood goes downhill, affecting my own and others' personal life

2) I have a great urge to find a flaw in the system after a losing trade, and correct it

3) after a streak of losing trades, just 2-3 are enough, or a month of trading where I'm +/- 0 on balance, or slightly below 0, I immediately seek a new system

 

I've been thinking about the remedy - perhaps quality mentorship putting me in the right mindset is what I'm lacking. I'll keep pursuing the topic.

[MadMarketScientist 11]

Siuya - Agree on your point, for me it was realizing that 60% - 65% winners means being wrong....a lot....but that's ok and isn't bad trading

 

Snowbird - I think people sometimes choose "auto-trade" expecting their computer will be this magical cash machine - never happens, but there can be some great benefits to having the system trade by your rules -- since you won't constantly derail the plan and override the strategy. I always have a rule with any "manual" adjustment to an entry, or my strategy, I better be right 2 out of 3 times I tweak something or I'm just killing my chance of profits

 

AgeKay -- Can't tell you how many times I've been in on those exact same trades as you. It makes one firm believers in conspiracy theories -- it's so freakin maddening at times this game we play. Just yesterday I was literally a tick or two away from goal, missed it then proceeded to have to trade 2 more hours just to get back to a point I was before I was a tick away from goal. Great rewards with trading but easily the greatest challenge most of us will ever face

 

Zdo - I'd say my worst trades ever have been the ones with no stop or no exit plan -- can't tell you how many times I would have been better off just to exit and reset

 

TheDude - my solution on that is to have my rules fully detailed before I take a trade then it's my job to execute the plan -- from there I do everything I can not to second guess. If I want to later reassess my rules or what I did that's fine, but as long as I followed the plan perfectly intraday I do anything I can not to get down on myself even if it doesn't go my way

 

gandalf33 -- you have a great point and area of concern for virtually anyone who trades unless you simply don't have emotions (now that would make trading easier!) -- what I tell people is if you can't handle being wrong, and being wrong every single day then trading is not going to work for you. I try to remind myself of a baseball analogy where you can be in the Hall of Fame batting .300 -- which means you reached the pinnacle of your game, but still "fail" 70% of the time. A suggestion is to go back and back test on paper your trade strategy - record every trade and walk it through yourself, don't have a system do it. Then look at the losing streaks and winning streaks. Look at the worst losing streak and double it. Then ask yourself, if that occurs starting tomorrow can your trade account or psyche take it? If not, adjust your risk, adjust your position size or your strategy.

 

Great feedback so far - thanks all!

[mike21 10]

 

When I finally understood what makes a robust system, and what is acceptable loss vs. what is not, I was able to turn the corner.

 

 

So, in your opinion, what does make a robust trading system?

 

.

[MadMarketScientist 11]

mike21 --

 

To answer your question, and this is what works for me - others might have different requirements or ideas.....I know for my personal psychology I'm not going to be able to trade a system that has less than 50% winners, even if in the long term it's profitable. Understanding my personal psychology, and looking at tables for example by Van Tharp who shows how many losses in a row you might get with less than 50% winners and I just realized it wouldn't work for me.

 

I personally look for 60%+ winners -- 65%+ even better. I have no expectation that I'm going to get 90% winners, etc... so for me this 60-65+ area is what I aim for.

 

Next, I want it to be a market that trades with frequency -- I get a bit bored if I have to wait a long time on set-ups -- I want frequency and the ability to finish quickly, at least on a good day.

 

I want to make sure my avg. gain vs. avg. loss is at least 1 to 1 and of course, the higher the better, net of commissions and slippage.

 

I also want to ensure the market is tradeable - some on paper look great but when you try to trade and execute it is a totally different story.

 

I also need the market I trade to maintain its volatility and trading range -- I don't like to constantly like to chase what's hot this week - I want something I can be trading 3 months from now and a year from now.

 

Hope that explains it a bit more. Thanks.

[gandalf33 10]

MMS, it almost sounds like you're describing me.

[MidKnight 12]

Perfectionism has been my weakness. Trying to get very low MAE entries and near perfect exits. Logically, I knew this was asking too much. After all, humans are imperfect, algorithms and models used to trade are imperfect, therefore the market is imperfect. But my mind defies logic sometimes. I started to conquer this when I focused less on the actual entry trigger and focused more on the general market conditions with zones to enter and scale-in around. Rather than before my single all-in entry off some type of strict rule bound trigger. I had to get lots and lots of exposure to taking a little heat on an entry. Perfectionism still affects me today, but it definitely has less control over me than it did for my first 3-4 years of trading.

 

Good thread.

 

With kind regards,

MK

[zdo 20]

I have one challenge only: I can't face losses.

 

Losses are killing me, a losing trade feels to me like a stab with a knife in the heart, while I have no problem losing at conventional games, e.g. chess, a single losing trade is something that puts me down. It's causing me so much pain that it's hard to express. I feel clouds darkening the sky of my mind after a losing trade. Like facing a huge block that you know will be almost impossible to get thru.

 

That thing is having a bazillion effects on me, all of them adverse:

1) my mood goes downhill, affecting my own and others' personal life

2) I have a great urge to find a flaw in the system after a losing trade, and correct it

3) after a streak of losing trades, just 2-3 are enough, or a month of trading where I'm +/- 0 on balance, or slightly below 0, I immediately seek a new system

 

....

 

gandalf33,

To keep from diluting this topic, I am quoting you and making some comments in the 'thyself' threads... maybe at least skim them.

 

Also nominating that post for Post of the Month

 

All the best,

 

zdo

[daedalus 10]

My biggest problem has been trying to "normalize" all of my trades. That each opportunity should go X ticks in favor so I can move my stop and that then the move should move another X amount in favor to a predefined Y target each time.

 

The markets aren't static, they don't offer identical opportunities and after you realize this you start to understand the need for a more relaxed and flexible management ideology for your trades.

 

Sometimes the trade blasts off immediately in favor, in which case you trail stops and try and garner as much profit as possible. Sometimes price consolidates a bit more with you in it and then only pops a bit - in these situations your probably best taking the profit offered and waiting for the next opportunity. And sometimes price just sits and waits without any real move in favor in which case sacrificing the position for a couple tick loss or at breakeven isn't a bad idea. Other times you just lose and in that case you don't double down you take your loss and move on.

 

And here's the kicker... you won't make the right call every time. Sometimes that consolidation and heat turns into a massive winner - without you on board, sometimes that quick pop you got out on turns into a big runner, and sometimes that loss you take knocks you out by 1 tick beyond your stop and reverses... but trying to be perfect in this imperfect profession is an impossible task. So don't try. Simply try and make the best call with the information available to you at the time and don't look back.

 

But allowing the discretion into my trading has been the thing I have to continually work on and consciously allow. As much as I like structure and a 1,2,3 approach to ringing the cash register the markets don't like to make it that easy on us and the sooner we realize it and embrace it the better chance we have to be successful.

[chaotic1 10]

I would say my greatest roadblock is being too impetuous. This is especially problematic if I have not made a trade in some time. I am still developing my rules to mitigate this, but it can be devastating. This is a problem much greater than if I have had a losing position or even if I have been put into a position of damage control when the market has jumped against me. When I get impulsive (impetuous) the positions is almost certain to go against me, even if it fits into my rules and by all rights everything should work as planned. :crap:

[MadMarketScientist 11]

I find it fascinating how so much of what is mentioned is clearly the psychology of trading. From the mention of the moods, to the desire to constantly fix what might not be broken. I always think that trading is actually totally unnatural for most of us. Human nature I don't think typically fits with how most of us are made up. We don't like to be wrong, we have a desire to fix things, we flee discomfort and uncomfortable situations, etc.... it takes a lot of work to break millions of years of coding

 

Not sure how many saw the story, but Goldman Sachs in Q1 didn't have a single losing day of trading. They made at least $25 million per day, many days over $100 million. And not a single negative day. Much to most of this is done with programs, and I would bet the removal of human emotion. I would assume there were a number of losing trades in their totals, but the computers relentlessly stick to the plan. Of course it probably doesn't hurt to be the "house" in trading and literally be able to move the markets....

[SIUYA 11]

dont forget according to Lloyd Goldmans is actually a market making house and broker just taking a clip....... they dont actually trade against their clients.

[AgeKay 10]

To answer your question, and this is what works for me - others might have different requirements or ideas.....I know for my personal psychology I'm not going to be able to trade a system that has less than 50% winners, even if in the long term it's profitable. Understanding my personal psychology, and looking at tables for example by Van Tharp who shows how many losses in a row you might get with less than 50% winners and I just realized it wouldn't work for me.

 

I personally look for 60%+ winners -- 65%+ even better. I have no expectation that I'm going to get 90% winners, etc... so for me this 60-65+ area is what I aim for.

 

Next, I want it to be a market that trades with frequency -- I get a bit bored if I have to wait a long time on set-ups -- I want frequency and the ability to finish quickly, at least on a good day.

 

I want to make sure my avg. gain vs. avg. loss is at least 1 to 1 and of course, the higher the better, net of commissions and slippage.

 

I also want to ensure the market is tradeable - some on paper look great but when you try to trade and execute it is a totally different story.

 

I also need the market I trade to maintain its volatility and trading range -- I don't like to constantly like to chase what's hot this week - I want something I can be trading 3 months from now and a year from now.

 

Same here. I think it's important to know what kind of strategy you can trade. I have the same psychological issues you have and knowing that keeps me from unsuccessfully trading other long-term profitable strategies.

 

I find it fascinating how so much of what is mentioned is clearly the psychology of trading. From the mention of the moods, to the desire to constantly fix what might not be broken. I always think that trading is actually totally unnatural for most of us. Human nature I don't think typically fits with how most of us are made up. We don't like to be wrong, we have a desire to fix things, we flee discomfort and uncomfortable situations, etc.... it takes a lot of work to break millions of years of coding

 

I think you hit it on the nail. I've done all of these things and this was always responsible for my losses. Based on my own trading, I've come to believe that long-term successful trading requires emotional stability and being aware of one's psychology.

 

I've been in a (psychological) slump lately where I would watch the market and be right (to the tick) about 90% of the time but as soon as I start trading emotions kick in and I seem to lose 80% of trades because I start taking trades that I normally wouldn't have.

 

AgeKay -- Can't tell you how many times I've been in on those exact same trades as you. It makes one firm believers in conspiracy theories -- it's so freakin maddening at times this game we play.

 

Just this morning I was stopped out to the tick (it literally didn't trade one tick lower) twice after which the market proceeded to move up to my target and I would have been filled each time. So instead of making 20 ticks, I lost 4. This is a 24 tick difference in my balance because of one damn tick. I noticed how that upset me and I had to tell myself "all right, it happens, stay calm, next trade will be a winner and you'll make it back" a few times before I was emotionally stable enough to take the next trade which was indeed a winner which made it all back and more. I reached my daily target a couple of trades later.

[BlowFish 10]

"Single Largest" if only it where that simple

 

Of course, if a man is both wise and lucky, he will not

make the same mistake twice. But he will make any one of the ten

thousand brothers or cousins of the original. The Mistake family

is so large that there is always one of them around when you

want to see what you can do in the fool-play line.

 

Reminiscences of a Stock Operator

[TheDude 10]

I'd urge everyone to read Brett Steenbarger's excellent book Enhancing Trader Performance.

 

He addresses everything from finding the right strategy that fits your personality, training and drills, and most importantly, addressing issues that result in poor performance through cognitive and behavioural methods. Examples are drawn from other high performance activities such as athletics, cycling (Lance Armstrong), baseball and the military. A lot of the proven methods of performing at your peak are of course transferable from these other areas. Perhaps most importantly, it reminds the reader of how many budding actors, singers, sportsmen hit the big time out of all the wannabees? The stats are similar for trading, and it reminds us exactly how much effort is required to achieve this, and describes the effort and sacrifices people at the top of their professions (actors, sportsmen, traders etc) had to put in and pay out to get to where they are - despite the media selling the dream that it's easy.

 

In my opinion, he blows Tharp and all the other pop and armchair psychologists out of the water.

 

On completion of the book, and putting some of the suggestions into practice, we realise we are not competing against the market or other traders, but ourselves. After reading and putting into practise some of the relevant exercises, you should be in a better position to compete against yourself.

 

The cost of this book is probably the best trade you will ever make!

Edited May 14, 2010 by TheDude

[MadMarketScientist 11]

TheDude - that looks like a great book - one I haven't read and hadn't heard of. It's now on my Kindle "to read" list.

 

Any thoughts on his newer one? The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist

[SIUYA 11]

MMS - self analysis when it comes to trading physc I would suggest could easily misdiagnose and then reinforce bad habits.

Most traders have enough problems looking at a chart and then saying its an uptrend or a downtrend, that getting them to self diagnose might be a big ask.

 

Evidence based analysis, then discussions with some one who can be objective would be the ideal therapy session....

 

On saying that I have not read the book mentioned, but have just spent two weeks chatting with some traders I know (many many years of experience) I have decided that day trading does not suit me, so why do it. I will stick to my knitting of longer term swings.

[TheDude 10]

TheDude - that looks like a great book - one I haven't read and hadn't heard of. It's now on my Kindle "to read" list.

 

Any thoughts on his newer one? The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist

 

No I haven't read it, but it does look good.

 

If I do buy another trading book, then that could well be it, but it WILL be the last trading book I ever buy. I know I said that last time (I say to myself), but....:haha:

 

 

 

SIUYA- I understand your point re self-diagnosis. You will for sure come to the wrong conclusions/misdiagnose if you ask the wrong questions. That is after all why people pay psychologists - because they know the questions to ask. The book informs you of the questions you need to ask yourself, so you can understand what causes problems.

 

Such an example - imagine youre in a trade. You ask your self 'how do I feel about the trade?' (this is relevant if your day trading or not). Logging your answers and comparing the result of trades may provide some clues. In my own experience, asking that question before I entered a trade, I realised that I had a feeling of anxiety as I entered losing trades - that my method suggested I take. The anxiety wasnt there on trades that became winners. Now, before I enter a trade, I ask if I am feeling anxious. I know, for me, its a defence mechanism telling me to avoid the trade. For others, that anxiety may only be there on winners. We're all different. But being able to tap into that helps make money.

 

Lets not forget, it's about sorting out trading issues, not deep psychological flaws like your need to post those videos of your ex-girlfriend on youporn.com or something odd :haha:

Edited May 19, 2010 by TheDude

[Attila 10]

For me there is anxiety in my trading.. likely due to small account.. I say "likely" because when I traded with more I still had the same feelings... Last 2 weeks have been the worst.. I pick trades VERY well and I mean very well.. Today I got NQ at 1851 and change.. Gap fill and ES at 1100 were the reasons.. at that point it was a VERY quick break-even trade with a first target of 1975 or so.. 60 seconds later, I am out at 57 and change.. I have a log requiring 30 minutes minimum hold but I ignore it as soon as the trade is on.

 

Fine to be scalper but I know my system generates a lot more than scalps.. YET EVERY time once I am in the trade I am someone else.. Someone that simply refuses to accept the possible loss required to make profits.. I am almost in more agony when in profit than loss... I seriously need help.. I have all the books, I should meditate.. etc.. My only solution may be to have someone else that is aware of my exit rules manage my trades.. Easily 200 to 300 NQ points squandered when there was no heat at all...

 

Seems so simple to simply force myself to hold for 30 mins no matter what (worst I lose 3pts).. do that for a week and slowly build up from there,, but one or two stop outs and I immediately revert to micromanaging and mentally thinking.. "see that's why this market must be watched all the time"

Edited May 19, 2010 by Attila

[OsbourneCox 10]

I do similar things, but it's not because I'm "someone else". I just make the tactical mistake of managing a swing trade as a day trade. That causes me to ignore the multi day picture and hyper focus on the 5min chart.

 

If you're going to swing trade, swing trade. Put on the trade, set your swing stop and stop paying attention to it. Just make sure your position size and stop combine to a loss that you can stomach.

 

By definition, a swing trade will take one or more days to hit your target. And by definition, the stock will both move for you and against you. There's no reason to watch that movement if it's going to stress you out. At the very least it's going to be a waste of time that can be used to look for additional setups.

 

It's funny, though, I'm AWESOME exiting trades. I can nail the extreme of a movement when I'm in a winning trade. It's my entries that suck. I'd be more than happy to manage your trade exits. :-D