I really enjoy different points of view. This is a learning process for me and I learn both from myself and from others. I don’t want to criticize anyone else’s approach nor do I want to say my approach is the only one. I’m just presenting my approach so that others can decide if there is anything useful for them.
Here’s my point of view on sim: If one cannot trade profitably on sim then one cannot trade profitably with real money. So you’re losing 5 weeks in a row. How long were you profitable on sim? If you were profitable for months on sim, then there is a problem following your plan or your plan stopped working. If you were not profitable on sim then you’re not likely to be profitable with real. If the plan stopped working (quite possible with the new volaility) then working on a new plan on sim may be a good idea. So let me know which is the case and then we can discuss it further.
It’s true that sim trade doesn’t have the same level of psychological involvement. However, we learn by repetition. By repeating a good behavior on sim, it becomes implanted in our brain. So when we take the training wheels off (go from sim to real) the good habits are still there. That makes it easier to deal with the new stress of real $ trading.
Trading without having passed the sim stage is like learning to ride a bike without training wheels. Sure you can do it, but the training wheels make it easier. You don’t get hurt, physically, emotionally, or financially. Every week I ask my 4 year old if we can take off her training wheels. She’s not ready yet so I don’t force her but there will be a time where they’ll have to come off. With my first daughter we took them off and she was riding her bike without them the first day. Those training wheels imprinted some good habits. But when we took them off, she had to develop some new ones. Better balance & increased speed to keep from falling down, for example.
Isn’t this the same as trading on sim? When we take the training wheels off, we then have new issues to deal with, psychological issues of risking real money. But having the foundation in place for following a trading plan makes it easier.
I always try to tackle one issue at a time. It’s easier that way. It’s like working your way up through a fighting competition. If you jump in a Battle Royal you’re chances of winning are slim. If you work your way up, one man at a time, you can rise to the top.
My specific problem is I’ve become very risk adverse. I lost a lot of my account so I want to hold on to what I have left. So I don’t want tight stops as that would give me more losers. I don’t want to take a loss on a wide stop as that gives me a big loser. I don’t want a profitable trade to turn into a loss so I scratch it as soon as it comes back to my entry (which it does the majority of the time). These are all detrimental behaviors that I need to fix.
If I go back to sim, I take off the psychological pressure to avoid losing money. I can focus on good habits. I can use 6 tick stop and stop out 10 times and it won’t be that bad. It would probably force me to better time my entries. I find this much easier and less painful to experiment. I’m talking about major experimenting. If it were just a minor tweak I’d try it in my real trading.
Trading is my full time job and my only source of income. My main focus is to manage risk so that I can stay in the game. Changing my trading plan involves a bit of risk.
My trading plan has evolved on the go and I’ve become looser and more risk seeking. Which was fine when the markets were calm and rotational. May was an outstanding month. But now with the volatility, risk management is more important.
Yesterday I got on the bus with FlowTraderES looking for a new high. It was finding sellers one tick before my target. I was very tempted to just get out. But I didn’t. I believed in my setup which told me there was a high probability of a new high. It hit my target and I got the full value (6.75 pts). If I take taken a point less that would still be good at 5.75, but imagine I take a point less on every trade. That’s going to add up. The majority of the time I cut my winner short, it ends up going to my target after I’m out.
Trading SPY – I thought of that but commissions end up being more than ES and really how much psychology pressure will you have trading a very small position? I find sim to be more effective but each person has to do what’s right for them. My friends trade ES and if I trade SPY that changes levels and everything. I thought of trading SPY as a proxy for ES – that is analyze ES but put the trade on SPY but I have no idea if that will work.
Everyone must find out what works for them and go with it. In my case I thought of a compromise – after one mistake I go to sim for rest of session (or day). This way I can still trade real, be motivated to trade well, and if I don’t then I practice on sim. The financial risk will be limited to one stop out (about $300 max). I just did a real money trade and traded it perfectly and got 3 pts. Had I cut it a point short, I would have gotten only 2. That really makes a difference over time. And I think this method of real until one mistake may be a good compromise.