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Jack Francisco

Luck- is It a Supportive Factor to Everyday Trading?

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I got lucky recently. I took a trade on the 6E when my entry conditions hadn't been fully met. The trade went against me immediately. I then tried to avoid the loss. I averaged down by adding another contract. That didn't work. I moved my stop several times. That didn't work either. The potential loss kept getting bigger. Price finally turned and came back to my original stop loss level. I gladly closed the position. I have since rewritten my trading plan. I have included a notation to "Never move stops or average down. Take the loss. Wait for a new opportunity."

 

It may sound odd but, for most traders, getting out of those meatgrinders unscathed is the worst thing that can happen. It's almost guaranteed that they will do it again. For some, it will become a habit. Traders tend to go bonehead and only remember the one time it worked. Panic and desperation can sure turn some traders into Larry, Curly or Moe in a hurry.

 

I'm relieved that it sounds like you didn't enjoy the ride and won't be considering any encores. Good for you...

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A lot happens in one's life that's about more than one's skills. There's luck involved.

 

So the lesson is...don't get too exuberant when you do well, and don't get too depressed when you don't.

 

Obviously this isn't meant to be taken to extremes and used as some sort of excuse. After all, it's been said that luck is what happens when preparation meets opportunity.

 

It's also been said that bad luck is when Opportunity knocks so hard that you need Preparation H.....ok, sorry...couldn't resist...

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chances of making 10 mistakes to blow your account and making 10 profitable trades to double your account are equal in theory...but you see more losers than winners :roll eyes:

 

Unfortunately this isn't quite true. If you have a 'coin-flip' entry system and use an identical stop-loss and profit target, given an even distribution of wins and losses over time, a trader will still wipe out their account. This is due to factors like slippage, spread, commissions, and account size. All things being truly equal, it's a mathematical certainty.

 

The classic explanation of this is given in Thorp's 'Beat the Dealer' with a discussion of red and black in a casino, where the house is still able to maintain an edge by imposing limits.

 

Having said all that, one of my favourite tests is to see whether a strategy is profitable when traded with an identical stop and target - it tells me something about whether the entry in isolation is better than a coin flip.

 

Hope that's helpful and, erm . . . good luck!

 

BlueHorseshoe

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Any vendors reading?

 

There's a fantastic product idea here in MM's post - Ostomy Pouches. You could do them in two sizes - Regular Cash Session capacity and Globex Maxi-Size. Print some candlesticks and your logo on the side, you'll make fortunes . . .

 

:)

 

BlueHorseshoe

 

I have also had trades that were set, meaning my stop is at be looking to add and I went to be to come back to a 200 tick move in oil. About 3 minutes time. No joke. I suspect I would have added so that pee cost me money too, but that was a welcome surprise. Going without coffee is just not an option either.

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I have also had trades that were set, meaning my stop is at be looking to add and I went to be to come back to a 200 tick move in oil. About 3 minutes time. No joke. I suspect I would have added so that pee cost me money too, but that was a welcome surprise. Going without coffee is just not an option either.

 

Trading oil and peeing at the same time - I guess that's why they call it "Crude"?

 

By the way, can you get back to me with some info on how many litres you normally urinate in a cash session - I've got a deal cooking on the colostomy bags with the boys over at TTM, and they're real sticklers for detail . . .

 

Thanks,

 

BlueHorseshoe

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I got lucky recently. I took a trade on the 6E when my entry conditions hadn't been fully met. The trade went against me immediately. I then tried to avoid the loss. I averaged down by adding another contract. That didn't work. I moved my stop several times. That didn't work either. The potential loss kept getting bigger. Price finally turned and came back to my original stop loss level. I gladly closed the position. I have since rewritten my trading plan. I have included a notation to "Never move stops or average down. Take the loss. Wait for a new opportunity."

 

Classic problem that some traders face of not following their original rules. Nothing wrong with adjusting and tweaking your system, but it is the way you went about it. You made numerous changes on the fly without any prior testing. Then you make a hard rule never to average down or move stops. Had you used a tool to work out your averaging ahead of time, you would have been prepared for the drawdown and been able to pick out profit targets more objectively. Choosing a new and untested method caused you to panic when immediate expected gains were not achieved. Is it fair to write off the entire method due to fear instead of re-attempting the method with a more thorough approach?

 

If your position came back to your original stop loss level, then you should have either broke even, or suffered a smaller loss because of the averaged total position.

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maybe Rocketdog has supplied an answer of sorts.......

 

good luck happens when you dont develop and then practice bad habits.

good luck happens you continue the things that you know do work and stop doing the things you know dont work

bad luck is the inverse.

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Cutting myself loose from this post... cutting out the worthless emails from my life... get a grip guys... kiss and make up.

 

Yeah, I'm getting pretty sick of the filthy rhetoric here too. Absolutely no need for it whatsoever.

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Classic problem that some traders face of not following their original rules. Nothing wrong with adjusting and tweaking your system, but it is the way you went about it. You made numerous changes on the fly without any prior testing. Then you make a hard rule never to average down or move stops. Had you used a tool to work out your averaging ahead of time, you would have been prepared for the drawdown and been able to pick out profit targets more objectively. Choosing a new and untested method caused you to panic when immediate expected gains were not achieved. Is it fair to write off the entire method due to fear instead of re-attempting the method with a more thorough approach?

 

If your position came back to your original stop loss level, then you should have either broke even, or suffered a smaller loss because of the averaged total position.

 

The fact that I averaged down probably minimised my losses but in hindsight it would have been far less stressful to take the initial loss and move on. I got into trouble by not following my trading plan. I 'jumped the gun', averaged own, widened my stop and still lost money. Lesson learned.

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Unfortunately this isn't quite true. If you have a 'coin-flip' entry system and use an identical stop-loss and profit target, given an even distribution of wins and losses over time, a trader will still wipe out their account. This is due to factors like slippage, spread, commissions, and account size. All things being truly equal, it's a mathematical certainty...

 

I was trying to say the same thing...the number of losers are more than number of winners even though the math says the chances are equal...

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I was trying to say the same thing...the number of losers are more than number of winners even though the math says the chances are equal...

 

I'd misunderstood you, then. I think that there are probably other reasons why many traders go broke besides, including, obviously, strategies with negative expectancies. I also think that there is a reason why many traders trading strategies with neutral expectancies go broke faster than they would through commissions, slippage, etc alone, but I don't know that I can be bothered trying to formulate why I think this is.

 

BlueHorseshoe

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Wow!, It looks like MMS stopped the pissing contest before it got out of hand.

 

Probably best. My Dad had a colostomy bag for a few years and died from it. I get a bit irate when someone jokes about it. Nobody cares, I know, but I feel better for at least speaking out.

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Probably best. My Dad had a colostomy bag for a few years and died from it. I get a bit irate when someone jokes about it. Nobody cares, I know, but I feel better for at least speaking out.

 

Roger,

 

My sincere apologies for any personal offence the topic of my jokes may have caused - the intended target was not those afflicted with illness.

 

Take care,

 

BlueHorseshoe

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Roger,

 

My sincere apologies for any personal offence the topic of my jokes may have caused - the intended target was not those afflicted with illness.

 

Take care,

 

BlueHorseshoe

 

If the community is going to need to be sensitive to everyone, then we will certainly have to rule out ugly jokes as well.

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Put it another way, put your stop 2 ticks or 10 ticks. It'll get hit either way.

 

It's not unlucky, it's facilitation of trade, just the market going where the people want to trade, well they don't want to trade, since they lose, but where they will trade.

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If the community is going to need to be sensitive to everyone, then we will certainly have to rule out ugly jokes as well.

 

This is off topic and will get deleted...so be it. I like a good joke as much as anyone. It's just the really offensive ones that hurt others that I can't stand. Crohn's disease is a terrible thing to watch someone you love suffer with and die from. I should have just left this thread and said nothing. I hate conflict almost as much as hurtful jokes. I just wish MMS had seen fit to remove the comments that I (and apparently one other) found offensive, but he chose not to. Oh well...if I don't like them then it's my problem, right?

 

Don't expect sensitivity to take root in TL, MM. It won't. But I pray that the insensitivity at least slows down and I pray also that karma does not exist. I'm done on this topic and on this thread.

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This is off topic and will get deleted...so be it. I like a good joke as much as anyone. It's just the really offensive ones that hurt others that I can't stand. Crohn's disease is a terrible thing to watch someone you love suffer with and die from. I should have just left this thread and said nothing. I hate conflict almost as much as hurtful jokes. I just wish MMS had seen fit to remove the comments that I (and apparently one other) found offensive, but he chose not to. Oh well...if I don't like them then it's my problem, right?

 

Don't expect sensitivity to take root in TL, MM. It won't. But I pray that the insensitivity at least slows down and I pray also that karma does not exist. I'm done on this topic and on this thread.

 

Roger,

 

Frequently comedy borders on the inappropriate. I think it might be best to not internalize the comments that happen here. It would be one thing if Blue and others knew of your sensitivity to your dad's illness and and then made the comment. I am confident that is not the case. He was having fun with the comment I made for the entertainment of those of us who still laugh at adolescent humor. If you know that he is British and then narrate his comments in your mind with a British accent, his comments were even funnier. I will grant you that it is only funny if you have not dealt with it.

 

MM

 

.

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Roger,

 

Frequently comedy borders on the inappropriate. I think it might be best to not internalize the comments that happen here. It would be one thing if Blue and others knew of your sensitivity to your dad's illness and and then made the comment. I am confident that is not the case. He was having fun with the comment I made for the entertainment of those of us who still laugh at adolescent humor. If you know that he is British and then narrate his comments in your mind with a British accent, his comments were even funnier. I will grant you that it is only funny if you have not dealt with it.

 

MM

 

.

 

I'm sure BH is a great guy and inappropriate humor is my middle name. When I was a radio announcer, I got in trouble at least twice a week....can't believe some of the things I said.

 

BH will continue his "bag" humor, I'm sure, but I never thought for a second that his references were directed at me or my family personally. Was never an issue.

 

I've had several Brits in my group over the years and the goofy things they come up with...and with that accent...geez, funny stuff.

 

Anyway, let's move on and get back on topic...trading.

 

Thanks for the insight, MM

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I've never met a profitable trader that relied (dependent upon) on luck to be consistently profitable. Yet, every profitable trader will have "some" lucky trades but not of any statistical significance especially when they will have nearly just as many "unlucky" trades.

 

Early today I had one "unlucky" trade (resulted in a loss) due to a trade execution error and then several hours later I had a "lucky" trade (resulted in a profit) via the exact same trade execution error.

Luck is an important factor that every trader should take into consideration.

Trader must have a good analytical skill or mind in order to make consistently profitable. Don't think today I am lucky and i am going to make huge profit in trading. Absolutely Wrong.

It's better to take a loss, being prudent and disciplined in your trading, rather than breaking your rules and coming out with a winner.

:cool:

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