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This is a discussion on my journal within the Trading Journals forums, part of the Reception category; Well, you're right on target. They only work 4 times out 5 because they are kamikaze trades and I keep ...

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Old Sep 9, 2009, 9:25pm   #17
 
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Yamato started this thread Well, you're right on target. They only work 4 times out 5 because they are kamikaze trades and I keep them open until they make money. Usually they'll make money within a few hours - those four I was talking about. Then one goes the other way for over a day, in which case I keep my trade open until I pretty much run out of margin. This way I blew out my account 3 times in the past year. Believe it or not.

The few times I used tight stoploss and takeprofits I got a majority of losses. As usual, when I saw that, I stopped using stoplosses, but then I have kamikaze trades, which, when unprofitable, turn into Hail Mary trades, when I realize I am not a kamikaze after all.

As far I can infer, there are no inferences to be drawn from my whole 12 years of discretionary trading, because I just don't have an excel-like mind, as to be able to compute all the statistics of my trades (over 12 years, or even just over a week) and be able to tell what works and what doesn't. I don't know how other manage to do it and come up with a successful strategy. Let me know, I'd be curious.

-------

Diary for today.

Thank to myself (I am atheist, so I can't say Thank God), today I didn't do any discretionary trading. However I did allow myself to exit early from a trade that was making 1000 dollars on the EUR. The trade went on (on my automated system) to make 1500 dollars, but I couldn't risk having it go against me, because yes one day I'll make 1500 but the next day 1000 will turn into -500, and if it happens now I am pretty much wiped out. So I deliberately interfered with my system, simply because if that 1000 went to 0, I wouldn't have been around for much longer.

Today, I decided to make a conscious effort to start acting in my best self interest and I didn't leave my office one minute early as i usually do, as a protest. I decided I'd stay my full 7 hours, so I wouldn't get reprimanded by the boss, which I enjoy doing, because of being a rebel.

Tonight there will be likewise another test - going to bed "early", which actually means "on time", in the sense of "on time to sleep enough", but you guys say "early". In my logic "early" means "too soon", but anyway I'll go to bed "on time".

Now, you have to know that I am also living from my trading, as an experiment - this way I get more sensitive to spending money and I don't waste it, whether with discretionary trading or with restaurants. I don't like to decrease my capital, whereas I never cared about my other account, where I get paid for my regular job. So I used to waste money on that account. Now I've put the ATM card away, so I don't spend anything from that account, and only use my trading account for everything.

The consequence is that...

Another test - eating. I must not go to the kitchen and eat just out of nervousness and anxiety (I just felt the urge to do so)... I am not hungry, so I shouldn't eat.

... the consequence of using my trading capital for living expenses is that today I took profit early. It's also that I don't waste money on restaurants any more. It's that I just eat at the cafeteria for my lunch break and I don't treat people to the japanese restaurant anymore. It's all good! This is new for me. So far the trading account has always been a black hole for money. I don't know if you say that, but it'd be a real surprise to me if I actually ever managed to live off my trading account. I am used to not being successful. This change is being quite traumatic. I don't mean to bring that psycho-mumble up again, but there may be some self-fulfilling prophecy of not succeeding because it'd make you too uncomfortable. There may be some self-sabotage after all, not in my trading. But in my spending money until I can level my account to zero again, because rising sums in my account always made uneasy. But it may also be some bull**** i am making up in order to feel better about not having any money in my account, like children say "I lost because I didn't even try".

----

Now enough with this writing, endless writing, expression of my obsessive-compulsive personality disorder.

Last edited by Yamato; Sep 9, 2009 at 9:46pm.
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Old Sep 9, 2009, 11:34pm   #18
 
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Originally Posted by travis View Post
.....................Well, you're right on target. They only work 4 times out 5 because they are kamikaze trades and I keep them open until they make money. Usually they'll make money within a few hours - those four I was talking about. Then one goes the other way for over a day, in which case I keep my trade open until I pretty much run out of margin. This way I blew out my account 3 times in the past year. Believe it or not..........................
Ah! The rebel in you doesn't like being wrong does it

What about postponing being right for a while. Set your alarm clock to your "few hours" and scrap your trade when times up, BUT with the intention of re-entering when your instinct (or whatever you use for entries) tells you the damn thing is now going to go in the direction you always thought it would.

jon
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Thanks! The following members like this post: tenbobtrader
Old Sep 10, 2009, 5:01am   #19
Joined Nov 2001
Interesting thread. I´m posting for a subscription.

Split
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Old Sep 10, 2009, 6:53am   #20
 
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...Set your alarm clock to your "few hours" and scrap your trade when times up, BUT with the intention of re-entering when your instinct ...
This would be good, and it might work, but as soon as I enter a trade, I lose control over my own actions. Besides, my intuition/instinct is not that good. I only go against the trend, trying to pick a top or bottom. I usually get it wrong (I anticipate, because I don't want to be late), then, after a while I may double up on my losing positions, and eventually it goes my way (4 times of 5), but when it does, I cut profits early, because I still remember the fear I felt when the position was going against me. Then, for the above reasons, when it doesn't eventually go my way (one time out of 5), I make disasters happen, ultimately because, instead of using a stoploss, I double up.I don't think I will ever be able to trade discretionary in a profitable way. In 12 years I have never had a profitable month. I lost a few hundred euros every month, for a total of about 50,000. In all this time, I traded like some people play the lottery, like regular fee paid to the government. Except that I always felt that the next trade would have been a profitable one, and that within a year I would have made a million. I tried changing methods and instruments over the years, but I kept on losing nonetheless. Then in 2002 someone told me about trading systems, and I started working on tradestation. But that wasn't enough. I had to automate them before anything good came out of it. Then in 2008 finally I had come up with both a reasonable back-tested AND automated system: it made money month after month until now. Along the way I have built 24 of them. They all work. But as for discretionary trading, I've never done anything good with it. I think it's been a blessing for the future: I had to work hard on developing automated systems because my discretionary trading was so bad. So now all that I still need to do is to quit this discretionary trading addiction. I guess we could have called it "training" for the first 2 years, but after 12 years of constant losses, we can call it an "addiction". As I said, I should have just paper-traded, but the problem is that you feel that the next trade will be a good one, that you've just made your last mistake, and this illusion never dies.

Last edited by Yamato; Sep 10, 2009 at 8:12am.
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Old Sep 10, 2009, 7:07am   #21
 
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Originally Posted by travis View Post
The only discipline you need is to paper trade until you have a profitable method.
Disagree. You can get a profitable method anywhere. In no time flat. Grief and despair provide the discipline and they are unavailable in a demo account.

YL
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Old Sep 10, 2009, 8:16am   #22
 
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Disagree. You can get a profitable method anywhere. In no time flat. Grief and despair provide the discipline and they are unavailable in a demo account.

YL
Yeah, this method may work for you (did you become profitable "in no time flat"?), but would you say that it works for a majority of traders? If it were this way, everyone would be profitable "in no time flat". Could you say that this is the case? Or would you say that they don't learn because they all paper trade? Then why do they all say that 95% of traders lose?

On the other hand, you could have a point if we consider that not everyone might experience the same level of "grief and despair" for losing money - for example, I admit that I was never in despair for losing a few hundreds a month, or giving back the few thousands that my system had made. Maybe that's the problem. Maybe the majority of traders lose, because they really don't mind losing very much.

However, those people who experience "grief and despair" for losing real money will be even more motivated to come up with a good strategy when they are paper trading. I have a friend, who's unemployed and he really can't afford to lose any money, and I am letting him use my paper trading account to see if he can come up with a good method, that will produce consistent profits for a few months. If he will succeed, I will give him the money to trade it (if I'll still have any left). He kept at it for a month and a half already, and he never told me "let me trade your real money immediately, so I can learn faster". Not just that he hasn't told me, but I think he never thought it, and I think if he did, it would be a warning sign of "gambler's mentality", and that I shouldn't give him any money.

To tell you the truth, acting like a gambler myself (and that is why I am now preaching to the contrary) I thought I would make money immediately or I that I would learn faster by investing real money, but it didn't happen. Maybe instead it would have happened (becoming profitable) if I took away the thrill of investing real money until I came up with a profitable method via paper trading. You see, I didn't paper trade also because it seemed pointless and boring. Whereas I think I should have also seen and used paper trading as a "punishment" for not having been profitable in the previous month. Instead, I just kept on filling up my trading account to cover my losses, and that way losses didn't hurt as much. I think in this sense it was an addiction.

Overall I agree with you that, to learn to do things right, you need "some" pain when you make a mistake ("panic" is too much, and it interferes with your logical thinking), which is the reward and punishment method. But if the trader actually doesn't feel pain for losing (like in my case, and in many other cases), then the necessary "punishment" (as in "reward and punishment") is to paper trade until he finds a profitable method, or else he'll just keep on losing money, without caring too much about it. On the other hand, the person who feels real pain and grief for losing will want to paper trade as well, because, as my friend, he won't be able to afford to lose.

Realistically, you can't become profitable "in no time flat" and, whether you care about losing money or you don't care too much (it's like a fee to you, worth paying for the excitement you get), if you want to learn without losing a lot of money in the process, paper trading is the way to go.

It's paradoxycal but, if you want to prove that you are serious as a trader and you seriously want to become profitable, then you actually prove it by paper trading - it's a sign of respect for your money. And if you have no respect for your money, then you can't become profitable. Trust me, I've been screwing around with trading for years. Yes, in the meanwhile, I learned a lot, but I made a majority of superficial trades. The most serious and hard-working part of my trading career has been the work I've done on trading systems, and the automation of them. The rest was a lot of screwing around.

That's the way I feel. At least I can certainly say this applies to me, and probably to all those traders who don't only trade to make money, but, whether they admit it or not, for the thrill of it (or "out of boredom", if you wish). Paper trading is a sacrifice to us, and if we do it, it means we are serious about making money, because we are not trading for the thrill of it, but only to find a method that works. The thrill is taken out. Well, I have explained my point more than enough, by any standards. The truth is that I was explaining it to myself.

Last edited by Yamato; Sep 10, 2009 at 9:30am.
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Old Sep 10, 2009, 11:24am   #23
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It is not possible to be continually successful with a discretionary attitude to trading, I agree with you, there, because you make up new rules as you go along. I believe in the KISS method, in other words, as few rules as possible because, if there are too many one rule will break another, but some rules, nevertheless.

Having said that, I'm afraid that I am not perfect at obeying rules. I try to but.........

Threads , such as these, do help concentrate the mind.
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Old Sep 10, 2009, 12:56pm   #24
 
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Yamato started this thread "...help concentrate the mind"? Thank you. I thought someone by now would have written they "help you go to sleep".
"...concentrate the mind"... funny that you say that, because I am an advocate of automated trading, whereby your mind should not deal with the markets during trading hours, but rather after trading hours, if you are developing your systems, and not at all, afterwards.
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