Dec 012010

November was a great month for me, not just in terms of money made but also in terms of my development as a trader.  Let me take a quick step back for those who may be new to the blog.

I traded with sine wave cycles & multiple timeframes for a year and a half.  In October I dropped all that and started focusing exclusively on trading S/R levels using volume profiling methods learned from FuturesTrader71.  I also worked on using tighter stops.  This was my focus for October and I traded the entire month on simulator.  I have journaled the process in the series A look back on my journey.  I highly recommend it if you haven’t read it already.

On the last day of October I started trading live.  And November was my best daytrading month ever.  This convinced me I’m on the right track.  But all is not perfect.  And I’m a perfectionist.  So let’s look at the results:

There are two things to notice.  First, my net expectancy per contract per trade (after commissions) is $20/22 euros.  Which amounts to about 2 ticks.  This is really low.  I have been doing some scalping but most of the trades were designed to catch +4 ticks and +8 ticks.  that’s 12 ticks total divided by 2 contracts = 6 ticks.  I should get 6 but I am getting 2.  Why?

One reason could be that the +6 is for winners.  Losers would be -6.  So if I had 66% winners and 33% losers that would make an average of 2 ticks.  But here is the second issue.  If you look at my Bund results you’ll see I only had 1 loser and it was for 1 tick!  So why did I average just 2 ticks?

I thought the answer was because I scratch a lot.  If it goes against me I just scratch it.  I spent a lot of October learning to scalp the DOM and when scalping for 2-6 ticks you don’t let it go against you. But when going for bigger trades getting out when it comes back towards my entry was taking me out of the game.

But the real reason is deeper than that.  It’s my monkey.  For those who are not familiar with FuturesTrader71, the monkey reference comes from his Webinar 3 – Beyond The Technicals; Inside a Winning Trader’s Mind.  This webinar has had a profound impact on my trading.  I highly recommend it.  It is one of the best webinars I’ve ever seen.

So yesterday after the close I was chatting with Gab.  I told him about my frustration.  I had made 1.5 pts real money and 7.25 on simulator.  And this was often the case.  I can’t remember exactly what he said but the summary was that I need to get off sim and do my thing.  I’m profitable and I need more confidence.  And then we continued chatting and I did some deep thinking.  I went over the Webinar 3 slides.  I explained everything to my risk manager (also my wife).  And everything became more clear.

When I started trading 3 years ago I did something very stupid.  Instead of putting $20k into an account, I put a lot of our money into my trading account.  I was stupid and I’m embarassed to talk about how stupid & naive I was but I figure if it can help someone from losing all their money then my embarassment is a small price to pay.  I was very risk seeking.  I had been successful in my life:  professionally & personally.  I didn’t know what defeat was because I had never experienced it.  And so I thought trading would be as easy.  I don’t need to tell you the rest.

So after losing the majority of my account, I changed from risk-seeking to risk-adverse.  And that’s my current monkey.  If I lose what I have left, I’m out of the game.  So I try not to lose, not even 1 tick.  I hate losing.  And so I do whatever I can to avoid it.  This includes:

  • Moving stops
  • Averaging down
  • Taking profit on winners so that they don’t become losers

Now the first two I’ve made a lot of progress and I’ve only done this a few times last month and admittedly I did it again today.  As I wrote about this in a previous post, I believe the lack of automated targets & stops in X_Trader is part of the problem.  So as of right now I’m going back to Ninjatrader.  And I won’t touch the stops.  My first ES trade today was a stop loss.  It felt great.  Not to lose money but to be in total control and take the stop like a man.

The third item, cutting winners short, turns out to be my biggest problem.  I studied my trades from yesterday and I realized that on all 3 real money trades I “got out” early.  However on the simulator trades I was patient and let the targets get hit.  And that’s why I made only 1.5 pts real and 7.25 on sim.  So this told me it was not my method holding me back but psychology and specifically my fear of those winners turning into losses.  Going back over my records I realize that I’ve done better on the Ninja DOM on sim than I have on X_Trader.  That’s partly due to not caring about a winner going negative on simulator and part because on Ninja the target & stop are set and I don’t touch them much.

So basically I’ve been sabotaging myself.  If it goes against me I give it more room.  If it goes in my favor I get out when it pulls back a few ticks.

So I decided a few things:

  1. I will use the Ninjatrader DOM.  I will give up the extra features of X_Trader in exchange for lower commissions and automatic stop & targets that I will resist moving.
  2. I will go for bigger setups that can make more than my risk
  3. I will be more patient with winners and not cut them short
  4. I will not trade against a strong move.  I will not fade a new high or low.  When I see a strong move I’ll be looking to enter with it on a pullback.
  5. I won’t trade Bund & ES on simulator.  Either it’s a good setup in my plan or it’s not.
  6. If I have doubts about a setup then I’ll trade it with 1/2 position (1 contract)

And the most important:  In November I made $5k daytrading.  I’m going to give myself permission to lose up to half of that in December.  If at any point I’m down $2500 for the month I’ll stop trading real money and go back to sim.  I don’t think I’ll lose $2500, in fact I’m predicting I’ll do even better than I did in November.  But just giving myself permission to lose $2500 will take all the pressure off.  I won’t need to avoid losses.  I will embrace them, as long as they’re small.  This monkey is going to have to find a new home.

  9 Responses to “November Results & Meet My Monkey”

  1. “So I try not to lose, not even 1 tick. I hate losing. And so I do whatever I can to avoid it.”
    Same thing here and the monkey is deeply rooted and as soon as a trade goes in the wrong direction the monkey takes control and starts to move stops and back in green again the monkey says YES and takes a two tick profit… Work in progress…

  2. Thanks for the comment Martin. I should have been more specific because I actually don’t get out in the situation you describe. When I get out is when it goes 3-4 ticks in my direction and then pulls back towards my entry. I’m looking at the price bars and if I think it’s going beyond my entry that’s when I get out, usually at my entry or with 1 tick.

    If it pulls back and then goes towards my target I don’t get out.

    I took trades on both X_Trader & Ninja today and my Ninja performance is way better. It’s not that Ninja DOM is better but that I rarely move my pre-configured target & stops on Ninja.

  3. Michael – “Garbage” is a strong word. Everyone is on their own journey. Glad your trading is going well. Barry

  4. Barry – You are correct and I edited that out. Others may be successful with the cycles & multiple timeframes and I shouldn’t criticize them just because I couldn’t make them work for me. I apologize if I offended you or anyone else.

  5. Michael – no offence really. Some things work for some people, etc. – and I know that cycles and multiple timeframes are somewhat complicated 🙂

    I’ve been a raving fan of some things in the past and then ended up moving on – Larry Williams being a case in point. But it was on my path and helped me get to where I am today.

    Best wishes, Barry

  6. Sounds very familiar,

    I was very risk seeking. I had been successful in my life: professionally & personally. I didn’t know what defeat was because I had never experienced it. And so I thought trading would be as easy. I don’t need to tell you the rest.

  7. Congrats! Great stats! I made the same mistake as you regarding ramping up the account with a lump and then losing 25% in 3 weeks. Perhaps it traumatized me but since then I hold no position over night and have an issue with cutting my winners short.

    You wrote that you will never sell a high or a low. Even not if it is right before a CLVN and you see rejection on the tape?
    I like your charts where you show your trading. It would be interesting to read more about your set-ups and how you use Volume Profile.


  8. There is nothing wrong with selling a new high or low, I just think it’s risky and I don’t have it in my plan. I have found those are more likely to either require a larger stop or to stop out. Especially on more volatile instruments such as Euro & Crude.

    If the market is balanced then I can do it, but if the market is imbalanced then I prefer to wait for a pullback.

  9. One thing that I can say that really helped me along in my journey is to follow one suggestion from above.

    ” rarely move my pre-configured target & stops on Ninja”…I’m with you there on some aspects. I never move my stop down which should be a given for any trader, but more importantly I never pre configure a target. To eliminate the possibility of further price action in my eyes is detrimental. My targets as they are first established are far away from entry and for the most part out of sight. As price approaches what would have been a preconfigured target I’ll simply place a stop order to allow for more if possible. I’m willing to give up 1-3 ticks from using a stop to lock in profits as the upside is limitless if price decides to gain momentum. I’m much quicker to lock in profits once we’ve surpassed what would have been my original target.
    Just thought I’d throw my 2 cents in. I hope it helps!

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