Saturday, April 14, 2007

Reflecting on a bad day


No one likes coming to a blog and reading about a losing trader, but I have to say some more about my loss on Friday, because it was a loss that wiped out a weeks worth of profit and is one of those big losing days that often occurs and makes you take a step back to reflect on why you suck at trading.

Bad things I did-
1.Traded 2x my usual size, by adding to a loser.
2.Failed to exit at signals due to the price reversion not putting me in the black.(Moreover I was greedy for not taking the small loss that the market offered me)
3.Let a scalp turn into a swing trade.
4.Let a winning day turn into a losing day.
5.Started swearing at the computer.
6.Looked at P/L during the day and lost focus on the trade signals.

Some other interesting things I noticed last night-
1.I opened my charts that show my indicators, and looked to see what trade signals my old system of indicators would have given me. I think this is bad, because indicators wouldn't have made a difference in my trading on Friday because I was avoiding taking my traditional trade signals due to greed and stubborness. I noticed some good setups on friday even though the market volatility sucked after the first hour and the day was characteristic of a slow trending day brought on by occasional pops from buy programs and short covering.

Here is what my indicator chart showed for the last 2 days-





Checkout the trend in ZN-



I have also come to the realization that I've never profited from one these long trending days. I often have been on the wrong side of the trade and have had some of my worst losing days by being on the wrong side of the trade on trending days. I've come to the conclusion that whenever I start swearing at the computer I need to stop trading. If I traded with stops I would probably never have a reason to swear at the computer because my bad trade would be stopped out and I would have stopped worrying about my bad trade that I was too stubborn to exit. Also, if I was stopped out I wouldn't have added to the losing position and would have avoided breaking even more rules. I also notice that the only times I use increased leverage is when I'm in a losing trade. Why don't I increase size on my winning trades? This is a big reason why I occasionally have big losing days and many small winning days. So, what can I do about this? Obviously the right thing to say is to do just the opposite. Increase my size on good trades and decrease size on losing trades. Easier said than done, but for right now I can limit my losses (and gains) by sticking to a fixed number of contracts held for a trade. For my account size I believe 4 contracts is the max I feel comfortable until my account size and confidence grows. I let a 1 contract scalp on YM turn into a 10 contract loser, which magnified the losses greatly.(please feel free to send me comments on how much I suck and how I'm going to blow out my account.)

Things to do to help avoid the losing days-
1.Keep position size for any particular trade between 1-4 contracts.
2.Take trade signals regardless of where you current position is. If you don't take the trade signal, you are greedy and deserve to take a bigger loss.
3.Initiate trades with 1 contract, use hard stop, and only add to winning trades.

Interesting links-
1.Jeff Quinto-(trading coach from photon trading)-
-Talks about traders that swear at their computers and the usual outcome.
-Lessons learned from extending daily loss limits.
2.Dr. Brett Steenbarger-
-Reviewing trades and learning from the losing days.
3.NYSE Scalper-
-April 14-15 Weekend reading list.

3 comments:

Jake said...

Sorry to hear to hear about the loss LP. Though you did predict it earlier after the 30 day win streak. Hey at least you know your predictions are still right. :)

I've been meaning to try out some of signals you mention like block trades NYSE Tick A/D ect. Can you tell me what package of data you use from IB and what it costs?

P.S. Thanks for all the valuable advice you so kindly hand out for free. It is greatly appreciated.

LifePost on 10:17 AM said...

Thanks Jack,

I think the loss will help me only work harder, I just need to make sure position size is within my comfort zone and start taking more small losses and gunning for big winners.

I use the standard package from IB with permission to trade everything. My data feed costs nothing since I meet the monthly requirement in commission generated. IB costs me nothing and quotetracker costs me $7 /month because I use the 10 day backfill, otherwise quotetracker would be free with a 3 day backfill. IB's data feed has never let me down. The only data feed problems that I've experienced is from the few times eCBOT went down, but that wasn't IB's fault

Yaser Anwar on 7:45 PM said...

LP-

I've found it useful to reflect on bad days on winning ones. You've had a good weak- why not keep it that way by reminding yourself of what you did bad and how you turned around?

I think it will help you dude, I sure hope it does.

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