Thursday, January 19, 2012
60% of this week's profits has vanished today
The market has finally punished me (again) for that stupid and risky natgas long trade taken at 2.580 on Monday. I was hoping for a more bullish EIA withdrawal number this morning but got a very disappointing one instead. Needless to say that within minutes of the announcement my stop at 2.38 was triggered generating a nice little $4000 loss in my trading account. Thanks God I got some pretty decent trading results today on other trades that helped dampen the hit. Basically, I lost 60% of the week's profit during today's session. I am obviously pretty mad at myself and encourage all readers here to not follow me in this contest of the stupidest trade because I will certainly win hands down all the time. Amazing. I keep repeating the same mistake over and over again. That's certainly a sign of mental illness don't you think? That's all I have to write about today. I'll go get drunk now. Net result for today -$1940 trading 2 contracts (commissions included). Details below.
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The way I got over taking big losses was to think about how many more opportunities I would have had by taking small stops instead. If I were a 1 contract intraday scalper on the CL, that $4000 would represent 40 opportunities to succeed, since I can trade it with a 10 tick stop.
ReplyDeleteIt's hard to convince someone who's been on a winning roll (such as you) to dial it back. The warning signs were there and I was trying to help before the bigger losses kicked in (when your other overnights were nice wins). So this is your wake-up call. Go back to the safe place you felt you were in when you were trading 1 contract where the magnitude of the bigger wins isn't so intoxicating.
You get the big bucks in intraday trading by adding to winning trades in trends and going all-in / all-out on modest winning pcts on a volatile contract and with net 1.6+ RR ratios. You have not yet experienced the thrill of adding on the CL (up to 7 times) in one strong trend, taking 30-90 mins to complete with a point run from your initial position of anywhere from 80 ticks to 2.5 pts. A mere 1 contract add each time gets you out of the loss or breakeven risk zone after 2nd add-on kicks in. You can make $1500 to 10K trading like that (with 1 contract lots) with your greatest loss contained to $400 (getting caught in a loser with only 2 contracts max). It happens 1-4 times per day on the CL. THAT'S the kind of greater reward for the risk you should be looking for.
You have shifted your focus to "not losing" by widening your stops. Yes, your winning pct goes up but look at what cost to your emotional well-being and ease of drawdown.
Beginners can't win more than 40% of the time. Yet NONE of them would ever add to winners in trends which is in total harmony with that kind of win rate. Ironic, isn't it?
I don't know your technicals but I have monitored your CL entries which suggests that they aren't stellar. So you're winning because you have been consistent in applying your edge(s). You've got the survival aspects of the biz licked. That's a given.
Are you even monitoring MAE's and MFE's of your edges on like a 10 day rotating basis, counting all of the day's winners on even the trades you didn't take? That's an eye-opener in itself and is super easy to maintain records of.
Don't be too hard on yourself. Losing money is a great teacher.
SteveH
Hi Steve. Yes, a wake-up call indeed but, as you say, losing is a great teacher. I am so stubborn sometimes when I think that something is undervalued (this time it was natgas but it could have been something else) that I am willing to bet the farm to prove my conviction and get a ginormous profit. The problem is that it almost never worked hence my "mental illness" (i.e. when you can't learn from your mistakes). I have to resist the temptation of making a home run and concentrate on what I do best.
DeleteYes, I do monitor my MAE's and MFE's but I trade probably too many things at the same time (hoping to diversify risk) that sometimes it's hard to keep track of all of this. Lots of ruminations for me right now. Thanks again dude!