Jul 072011

I’m concerned about my performance over the past few weeks.  My equity curve shows it all:


The big drop was due to a big loss.  That was stupid and I deserve it.  I shouldn’t let losses get that big. And afterward I quickly rebounded.  And then Friday I took another big loss when I got stuck short on ES.  And this week there is no quick rebound, but rather small wins & losses.

My inability to bounce back is one thing that concerns me, and taking two big losses is the other.   So I’ve been investigating this.  I think my success in May and first part of June made me over-confident and sloppy.  And it’s not a coincidence that my big losing days occurred during the Greece default news and increased volatility.

Also interesting is that I started trading the Euro on simulator on June 17 which is precisely the high of my equity curve.  I’ve been profitable on the Euro, possibly to the deteriment of my Bund & ES trading!

So here’s my plan:

  1. Focus on better setups so I can trade less.  Don’t look at the Euro unless it’s in one of my areas to do business.  I will use audio alerts for this.  Same for ES.  I will focus intensely on the Bund.
  2. Cut out distractions:
    1. My kids are on summer vacation and I’ve had my kids at home with me 3 days/week since last week.  If they bother me I will lock them in their room.
    2. Stop using Twitter while trading.  I’ve realized that instead of doing my own thinking I’ve become reliant on reading what Rob & FT have to say.  They’re great traders but I can’t trade like them.  I need to focus on my own trading.  I’ll study their tweets when I’m not trading so that I can learn from them without interfering with my own trading.
  3. Verbally talk out what’s happening on each bar, just like I do in the videos.  I find I trade much better when recording video.  That’s probably not a coincidence.
  4. Increase the quality of my homework.  I need to be more thorough.  This is tough because the markets close at 10pm my time which is later that I’d like.  And they open at 8am which is earlier than I’d like.  Need to sacrifice a little to do better homework.
  5. Revise the risk management portion of my trading plan.  This will take some time and will involve some simulator practice.  I need to be quicker to admit I’m wrong and exit with a small loss.
  6. Reduce my position size from 2-4 to 1-2 and stop averaging down (pre-planned scaling in as I’ve shown in my real time videos is OK, it’s the unplanned adding that puts me over my risk limits).

This is quite ambitious.  However in the past, every time I’ve taken a time-out to revise my trading plan and practice on simulator, it has improved my trading immensely.  It’s hard to trade sim and forgo my 200 Euros / $300 average per day, but I think I will make more in the long run.  If I keep trading real money now I will be repeating bad habits and possibly loose more money.

I’ll be reporting on my progress.


  7 Responses to “Houston, we have a problem”

  1. Have got the exactly the same worries, April +23%, May +17% on the account and… June two days of BIG losses some weeks apart resulting in -25% June/July. Who did say that overcoming these mental “flaws” is easy…

  2. Hey Michael, you can not lock your kids in. You are responsible for them. Use the time they are around with them and better trade on sim if they interfere with your traiding. Seriously. (hope your wife does not read your blog posts 😉


  3. From your comment I take it you don’t have kids. Yesterday they were fighting so I put them both in one of their bedrooms (the one farthest from my office) and shut the door. 20 minutes later I went to check on them and they were playing peacefully. I let them out and they didn’t fight again for the rest of the morning.

  4. Michael, I have a 9 year old son and I will hopefully have a baby later this year. I know how annoying it can be sometimes, but if it gets so far that I become really pissed than I know I better don’t trade in that spirit.

  5. To me currently I feel that number 5 is crucial, I know that if I wont be able to cut losses at 2-4 ticks (es) I wont be profitable – it is hard realizing you are wrong.
    Also I think it is part of my “entry fear factor”, not knowing that Im able to cut loss short.

    Second is the “working from home” thing:
    1) it happens that ES opens at 16:30 and my 18 months old kid is at home, although I dont need to
    watch him (if I do I dont trade obviously as he is too little) he make noise and it is really distracting,
    now add to that 1 bad trade and I’m all pist off…
    2) Staying at home all day, not going to the office and meet other humen beings is hard, feel not vital.

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