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

[MadMarketScientist 11]

Phil.....good points. I do think traders get analysis paralysis quite often. And, clearly end up using approaches that are either way too complicated, or try to muddle and mix multiple different approaches in a one size fits all.

 

Sometimes simple is best -- or at the very least gives you very similar odds than completely ridiculously complex approaches do - and it's easier to read.

 

It reminds me of some training I took 10+ years ago. It actually wasn't bad despite the $6K price tag but it was so darn complex. 3 charts, different timeframes, let's say 3 or 4 indicators on each chart, all had to be analyzed in real-time to get your signal. Let's just say a lot of room to make a mistake. Sure, the odds were in your favor - maybe gave a 65% - 75% edge. However, it was nearly impossible in real-time since it was so difficult to do all the analysis fast enough and not make an error -- whereas I've done approaches with 1 chart, and 1 or 2 indicators with the same edge. Which do I prefer?

 

MMS

[wow 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.

 

That call: Fear, Fear, and Fear. Go conquer it you'll be fine.:haha:

[MadMarketScientist 11]

Seems easy enough - just conquer your fear.

 

However when you think about it, there's a lot to fear with trading. Fear of losses. Fear of being wrong. Fear of making a mistake. Fear of slippage. Fear of missing target by a tick. Fear of stopping out by a tick then watching trade go to full target. Fear of stopping trading for the day and missing the next winner. Fear of not doubling down or never recovering. Fear of big drawdowns. Fear of having to redeposit funds into a wiped out account. Fear of losing shirt. Fear of not making the mortgage. And, any of us could go on and on.

 

Perhaps there's a healthy dose of fear in trading the markets that's necessary. Of course just south of crippling!

 

MMS

[suckassjuice 10]

Biggest road block for me is learning to be a pig.

 

Like they say: Bears make (and lose) money, Bulls make (and lose) money, but Pigs are some smart fucking animals.

 

I'm more concerned with consistently making money, much more so than any need to stroke my ego more often than not (i.e., demanding a win/loss ratio of greater than 50%). The average sized winner versus average sized loser, is the most important metric to focus on and it's the only way to truly make any real money in this endeavor. Gotta get the win size hugely disproportionate to the the loss size. To do this, cut losses quickly and let runners run and run and run (i.e., be a pig!). I have no problem with a 40% win ratio when the win size is at 5:1 or even greater.

 

The practical approach of being "reasonable" is, as a whole, detrimental when it comes to trading. Notwithstanding, it is so hard to shift one's mindset to this when being reasonable in your other daily pursuits is a valued approached.

 

Jason

[MadMarketScientist 11]

Jason:

 

Thanks for the post and participation here on TL.

 

If you can manage like you do to get a 5:1 win/loss ratio that's fantastic and I'm with you there - who cares if the win/loss is lower on a percentage basis. I do think in the 40% range some people don't realize it will be common to take 5 losses in a row - the math just shows it - so they have to prepare for more consecutive losers in preparation for that big win that redeems all that came before. Psychologically some people are not able to handle that.

 

I can say though I have also not been able to manage to a 5:1 ratio or better in my trading -- maybe it's because I'm also not willing to have my winning percentage usually drop much below 60% but more power to you if you are able!

 

MMS

 

 

Biggest road block for me is learning to be a pig.

 

Like they say: Bears make (and lose) money, Bulls make (and lose) money, but Pigs are some smart fucking animals.

 

I'm more concerned with consistently making money, much more so than any need to stroke my ego more often than not (i.e., demanding a win/loss ratio of greater than 50%). The average sized winner versus average sized loser, is the most important metric to focus on and it's the only way to truly make any real money in this endeavor. Gotta get the win size hugely disproportionate to the the loss size. To do this, cut losses quickly and let runners run and run and run (i.e., be a pig!). I have no problem with a 40% win ratio when the win size is at 5:1 or even greater.

 

The practical approach of being "reasonable" is, as a whole, detrimental when it comes to trading. Notwithstanding, it is so hard to shift one's mindset to this when being reasonable in your other daily pursuits is a valued approached.

 

Jason

[stpips89 10]

I agree, 5:1 winners are difficult to come by, the problem is that you have sit by and watch many 2:1 winners turn into losers...I'd rather take the money and run.

[Phil-n-Texas 10]

fwiw, i scale out while progressively tightening stops and then trail the last part of the position with a break even + a tick protective stop. i just started using IB's booktrader and went live with it today.... makes it much easier to do the scaling thing. i was using Nirvana's trade plans in their Omnitrader platform which was really slick but it had some s/w bug issues and ended up costing me some dough on a few trades. TOS has a bracket system in their active trader tool but i'm able to do the same thing in book-trader.

[MadMarketScientist 11]

Wasn't aware of this IB booktrader thing - - what is that exactly?

 

Currently I use Ninjatrader hooked into my IB to manage all trades. Similar?

 

What were your thoughts on Omnitrader -- I always get their direct mail but never ran into anyone using it.

 

MMS

[Phil-n-Texas 10]

Wasn't aware of this IB booktrader thing - - what is that exactly?

 

Currently I use Ninjatrader hooked into my IB to manage all trades. Similar?

 

What were your thoughts on Omnitrader -- I always get their direct mail but never ran into anyone using it.

 

MMS

 

the IB booktrader is very much like the TOS Active Trader ladder / DOM thing.

 

here's a link to a webinar that goes over its features etc.

 

https://interactivebrokers.webex.com/ec0605lb/eventcenter/recording/recordAction.do;jsessionid=jlGvMcSKv21qVy1TvxnSmQTqTMWZL5HDXJhlwFtqLh18GTm2n2MY!-1446735493?theAction=poprecord&actname=%2Feventcenter%2Fframe%2Fg.do&apiname=lsr.php&renewticket=0&renewticket=0&actappname=ec0605lb&entappname=url0107lb&needFilter=false&&isurlact=true&entactname=%2FnbrRecordingURL.do&rID=44492942&rKey=1f144c564fccf9ac&recordID=44492942&rnd=1787550564&siteurl=interactivebrokers&SP=EC&AT=pb&format=short

 

also here's a pic i took of if from my screen...

 

 

as for Nirvana / OmniTrader, I REALLY liked it for awhile and they have a lot of really neat features and if you get the pro version you can write your own systems, scripts, and strategies... tons of bells and whistles. The problem is I think they have sooooo much feature rich components to their systems but the s/w is very buggy... seems like a lot of unfinished business. Too much to type really... I hung with 'em for a couple years but there was a major snafu with their trade plans / integrated brokerage that lost me and at least a few other guys i know of some $$$. Additionally since moving on from Nirvana, I now incorporate tick charts, Heiken Ashi candles, Range Candles, and a few other goodies in my setup and Nirvana doesn't do any of that stuff as of the writing of this message.

 

I wrote some pretty nice strategies in OT Omni-Language and did real well with it but the integrated brokerage / trade plans snafu and their total lack of response to the problem was the last straw. When I reported the problem they acknowledge that it was an issue and had been reported the previous week. No bulletin of anything warning users to not use it. I didn't get hurt too bad but one guy lost about 14K because of it.

 

The other thing is, it's fairly pricey... i spent way too much money with those guys. I still have it on my machine and use it mainly for scanning stocks and so forth but don't really use it to trade anymore. I'm using TOS and IB and that's been working really well for me ever since dumping Nirvana.

 

Here's a pic of a trade I did with OmniTrader earlier this year. This shows the chevrons on the side-bar of the chart which could be dragged to wherever you wanted them, but the trade-plans would automate multi-level scaling in and out to your hearts desire. Could also program stops based on N-bars, indicators or whatever you can think of.

 

 

Plus with the Nirvana system one needs to have a data feed and some subscriptions but with TOS and IB I don't really need that, or no more than the exchange fees. So with the OT system to do RT daytrading was about another $100 / mth to do some futures.

 

If the OT system didn't have the bug issues and they had tick charts etc. then it would probably be the only system I would need. I just got tired of trouble shooting stuff for them all the time and eventually the instability issues forced me to go elsewhere.

 

I've never used Ninja, but the graphics I've seen of it here and elsewhere look a lot like the Nirvana stuff.

[MadMarketScientist 11]

Phil,

 

Thanks so much for the comprehensive reply. I'm going to check out that IB feature -- I like the look of it.

 

The overview on OmniTrader is interesting as well -- I actually remember probably 10+ years ago using it in one of the early gyrations. That was back when I didn't quite get that backtesting has some resemblance of future results. Lesson learned a long time ago

 

I still get their mail and it's always positioned like get in now, the next version is going to be amazing. Good marketing. Obviously has value though you detail some of the issues as well.

 

Ninja charting I actually don't use -- I just use their interface to manage from the entry to the exit and also handle the automation when I want to use it from Tradestation strategy into the IB broker which is kinda cool.

 

MMS

[BlowFish 10]

Biggest road block for me is learning to be a pig.

 

Like they say: Bears make (and lose) money, Bulls make (and lose) money, but Pigs are some smart fucking animals.

 

I'm more concerned with consistently making money, much more so than any need to stroke my ego more often than not (i.e., demanding a win/loss ratio of greater than 50%). The average sized winner versus average sized loser, is the most important metric to focus on and it's the only way to truly make any real money in this endeavor. Gotta get the win size hugely disproportionate to the the loss size. To do this, cut losses quickly and let runners run and run and run (i.e., be a pig!). I have no problem with a 40% win ratio when the win size is at 5:1 or even greater.

 

The practical approach of being "reasonable" is, as a whole, detrimental when it comes to trading. Notwithstanding, it is so hard to shift one's mindset to this when being reasonable in your other daily pursuits is a valued approached.

 

Jason

 

That's just one way of doing it. The most important metric to focus on is risk of ruin RoR.

 

Funnily enough higher percentage approaches that have smaller R:R (or even fractional) have much smoother equity curves with smaller strings of losers. The type of approach (lower % higher RR) you describe is hard to trade as you will have to deal with 10+ losers in a row.

 

Oh and pigs get slaughtered don't they?

[gandalf33 10]

BlowFish,

 

I believe the way of trading you describe (higher %, lower RRR) has it's drawbacks too. You will still occasionally hit a losing string and those losses can be devastating (e.g. if you lose 2x or 3x more than your 1 winning trade size).

 

But it's a personal choice - for me, higher win % and stability is more important than earning more money per contract thru lower win % and profit targets behind the horizon'.

[BlowFish 10]

Sure there will but the will be hugely less likely. Look at RoR all the answers are there, the risk of ruin diminishes hugely as the % rises. Who would not want a smoother equity curve?

[MadMarketScientist 11]

I think one thing anyone should address beyond the numbers is what they can personally handle.

 

Back in the days when I would do some training of others, etc... I would find that you could show them hard numbers and facts and they'd say "sure no problem, I can handle that" but then in reality it would tear them up -- whether it was someone who couldn't handle the large number of losses waiting for a home run, or someone else who maybe couldn't deal with many small wins, but then has all that work periodically wiped out in a trade or day.

 

The stats are great -- but ultimately it does come down to what you can emotionally handle. For example, for myself I know I cannot have a winning percentage below 50% and I really need about 60%+ to be satisfied but I know that means more than likely I'm not going to have 5:1 ratios.....

 

MMS

[stpips89 10]

I think one thing anyone should address beyond the numbers is what they can personally handle.

 

Back in the days when I would do some training of others, etc... I would find that you could show them hard numbers and facts and they'd say "sure no problem, I can handle that" but then in reality it would tear them up -- whether it was someone who couldn't handle the large number of losses waiting for a home run, or someone else who maybe couldn't deal with many small wins, but then has all that work periodically wiped out in a trade or day.

 

The stats are great -- but ultimately it does come down to what you can emotionally handle. For example, for myself I know I cannot have a winning percentage below 50% and I really need about 60%+ to be satisfied but I know that means more than likely I'm not going to have 5:1 ratios.....

 

MMS

 

It probably means you will have to trade less frequently too. Traders I think want to have both high winning percentages and big profits on every trade, its not really possible though. If you have a high winning percentage you are probably going to take fewer trades than the masses. If you trade a lot you aren't going to be able to have a high percentage of winners and make big money on every trade.

[FulcrumTrader 10]

In past months I have shifted all my intraday trading to 3:1 set ups with less focus on win/loss ratios......this has worked very well and even seems more laid back. I find I am more patient waiting for clear set ups and then working the trade versus frequent scalping activity intraday.

[Kiwi 16]

In past months I have shifted all my intraday trading to 3:1 set ups with less focus on win/loss ratios......this has worked very well and even seems more laid back. I find I am more patient waiting for clear set ups and then working the trade versus frequent scalping activity intraday.

 

 

I don't use 3:1 or 1:1. I use the exit target that makes sense from the recent price activity and then tune my entries a little to make sure that I have enough to give a good expectancy with my likely win/loss ratio. In other words I have a heuristic like "no worse than 1.4 to 1" say.

 

I assume you are not going for precisely 3:1 either.

[MadMarketScientist 11]

Have to agree that it's probably hard to have a in stone ratio -- market conditions vary too much.

 

But, I can see why coming up with a stricter reward/risk ratio can actually make you a much more selective trader.

 

And, in my experience traders who actually work on trading less and not more are more profitable on average.

 

MMS

[Kiwi 16]

Agree with that last sentence MMS - "traders who actually work on trading less and not more are more profitable on average."

 

Just putting the other spin on it. One can be more selective for trades with a larger probable excursion or for trades with a higher probability of reaching a smaller target. Sometimes both can be achieved with the same setup although sometimes they are different.

 

Personally I favour the Trend Dynamics style of taking part off at the Non-Trend Liquidation point and part played for trend ... when the setup has large excursion written all over it. Non-trend liquidation is a term they use to describe that point where you'd say "if the trend doesn't continue here, what is the point it is likely to reach anyway before the trend continuation fails." I wouldn't call it a scalp but it might have an 80% probability of being hit and might return less than 1:1 whereas the trend trade might have 10:1 or greater potential if it really ran.

 

But in either case selectivity is the key to really hitting it. Then the only problem is: "if I am this selective, assuming I miss 35% of trades, will I be getting enough trades per day/week/month to achieve my objectives?"

 

 

(I trade HSI on 1m bars so there are 270 bars in a day - two sessions with a 2 hour lunch break In the old days I used to get 10 trades or so in a day but now I get 2 or 3. But the quality is really up there.

 

I'm not trying to take anything away from the 3:1 or better trades. Just point out the potential merit of having both views.)

[stpips89 10]

I agree that less trading is better, it took me a while to realize the power of not looking at the market so much or trading so much, and my trading account has grown more consistently.

[MadMarketScientist 11]

It's one of the hardest things to get used to. In life usually the harder you work and the more you do the more successful you are.

 

In trading it's strange to think sometimes the less you do, and the more you cut out the work the better you can do overall.

 

I'm not saying it's a recipe of success for everyone but I'd bet anything that more people would survive and make it, even if that's still a smaller percentage of they scaled back their frequency.

 

MMS

[nakachalet 10]

Seems easy enough - just conquer your fear.

 

However when you think about it, there's a lot to fear with trading. Fear of losses. Fear of being wrong. Fear of making a mistake. Fear of slippage. Fear of missing target by a tick. Fear of stopping out by a tick then watching trade go to full target. Fear of stopping trading for the day and missing the next winner. Fear of not doubling down or never recovering. Fear of big drawdowns. Fear of having to redeposit funds into a wiped out account. Fear of losing shirt. Fear of not making the mortgage. And, any of us could go on and on.

 

Perhaps there's a healthy dose of fear in trading the markets that's necessary. Of course just south of crippling!

 

MMS

 

fear of doubling down, especially when you have a pair of aces....?

 

wonder if those so called traders.... do they think they are trading or playing on a blackjack table....?

 

show me someone who is doubling down chasing the ticker up and down.... and i'll show you a successful traders with a depleted acct.... :crap:

 

i ought to agree with you.... there are plenty of fears.... but they are only surfacing inside of those who are learning to how to trade....

 

for someone trading for a living, whence a trade is triggered, the particular trader is also in the mind set that he/she is willing to accept the consequences that.... if and when the market goes the other way.... the stoploss is already predetermined and presetted and conclusively agreed in the trading plan, the trading strategy and the money management risk.... just for the purpose of preventing the emotion from running rampant....

 

BUT IF YOU ARE FEARFUL AND DO NOT have a trading map, then withhold your trading live until then.... good luck and have fun trading live or otherwise.... everyone.

[nakachalet 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.

 

i wonder if you have a confidence building trading plan, stats, strategy and risk management in place before you even trigger a trade....

 

well, do you?

 

if you still do not have confidence in your trading plan, stats and strategy and risk management.... why give away your money so easily and so defenselessly....?

 

have been doing exactly that and relying on those four factors completely and unabashedly for multiple years.... they are independently good for your health as well as your wealth....

[nakachalet 10]

Hi Attila,

 

A highly personal and non-rhetorical question for you, but have you considered that the 30m hold approach you are trying to instill just does not suit your personality? It may be easier and less painful to trade in a manner that suits your personality - regardless if it is less profitable than another approach you would like to trade.

 

Some food for thought

 

With kind regards,

MK

midknight.... YOU ARE THE MAN....

 

that is also the first and foremost element in good and profitable and fun trading....

 

know yourself, your style and your tolerance level before you ever ever trigger your first sim....

 

three cheers

[nakachalet 10]

It's one of the hardest things to get used to. In life usually the harder you work and the more you do the more successful you are.

 

In trading it's strange to think sometimes the less you do, and the more you cut out the work the better you can do overall.

 

I'm not saying it's a recipe of success for everyone but I'd bet anything that more people would survive and make it, even if that's still a smaller percentage of they scaled back their frequency.

 

MMS

you have been advising pretty good so far.... and now....

In trading it's strange to think sometimes the less you do, and the more you cut out the work the better you can do overall.

 

I'm not saying it's a recipe of success for everyone but I'd bet anything that more people would survive and make it, even if that's still a smaller percentage of they scaled back their frequency.

 

it is so unlike something coming out of someone who has been successful in trading....

 

what you are trying to do here?.... are you trying to sell something here later on, perhaps?

 

anyone wishing to become a successful and profitable trader needs to have the following four components in the trading arsenal; a personalized trading plan, a private stats, a sensible strategy and an equitable risk management plan, be it 5k or 100k.... it matters not one bit....

 

do not even attempt to trade live, if you are not already completely settled with the aforementioned four factors in trading.... :doh: