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This is a discussion on my journal within the Trading Journals forums, part of the Reception category; I agree about everything you said. Especially the last sentence: if you have rules that can be broken, and that ...

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Old Sep 9, 2009, 2:35pm   #15
 
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travis started this thread I agree about everything you said. Especially the last sentence: if you have rules that can be broken, and that it makes sense to break because it will bring profits, then they are not rules, are they? On the other hand, I understand if you say that usually you should not break them. It does make a difference. But once again, that trader is a trader who trades by instinct, and doesn't even know exactly what he's doing. He knows he's been making money, most likely he'll keep on making money... but it's all up to his mind. If it works well... otherwise he'll start losing tomorrow.

With automated trading, I can be excited or depressed, but the system won't care. Since I am so unstable, it's the only way for me to go.

Yes, I did make money, a lot of it. Lost most of it with discretionary trading. I still have some left. It's pretty depressing considering how much money I threw away, and each time I was hoping to "help" my systems make more money. Sometimes I got home and saw a loss by the system so I tried to cover it with a discretionary trade, but most of the time I made things worse. Or rather 4 times out of 5 I made money, and on the fifth time I lost everything I had made in the previous 4 discretionary trades plus much more.

I simply do not have a profitable discretionary method, and I might never be able to develop one. Sure, I could manually trade my automated system, but that is not a discretionary method. Also, if I add any discretion to it, by slightly changing its choices, I just end up hurting profits. But then why do I want a discretionary method? Because I want to make more money and because it's exciting. I have fun making profitable trades. I dislike just sitting and hoping for my system to make money as fast as possible.

-----------

How long have i been recapitulating this stuff, over and over again? Months. First of all I want to make things clear in my head by stating them out loud.

I just got home from work.

I want to recapitulate one more time.


1) If you have a profitable method you'll use it - there's no psycho-mumble needed here, about self-sabotage and so on (if you were that masochistic, you wouldn't have developed a profitable system to begin with).

2) If you do not have a profitable method, you have two options:
  • find one via paper trading or back-testing
  • trade with real money nonetheless

The first option also excludes the utility of any psycho-mumble, because it brings you to point #1, or it doesn't cause you any financial damage, so there's no stress in either case.

The second option, one of not having a profitable method and still trading real money, does have to do with psychology. It has to do with the illusion of all gamblers: it's easy, I'll make it back if I keep trying. But the solution has once again nothing to do with the psycho-mumble on financial web sites. The answer is: you're not that good, it's not that easy to process in your head what works and what doesn't, so go back to option #1 and paper trade or back-test. Nothing to do with "you weren't disciplined enough to use the stoploss". It makes no sense to force yourself to use a stoploss if you're not sure whether it works or not (what level, etc.). You're not going to become profitable by forcing yourself to follow rules that you don't know to work. So it makes no sense to talk of developing your discipline, but only of developing your intuition and feel for the market, by paper-trading, once again. Or by back-testing, and taking the automated trading route. All this talk about discipline and psychology is therefore bull****.

Once again, here you have the summary of all trading manuals in the world in just 3 lines and free of charge:
  1. If you have a profitable method, follow it (it will come natural).
  2. If you don't have a profitable method yet, paper trade.
  3. Don't go trying to force yourself to follow rules that are not proven to work - forget this psycho-bull****, it will just throw you off course, for years. If you are not making money, it's not because there's something wrong with your personality but because you didn't develop a profitable method. The only discipline you need is to paper trade until you have a profitable method. Discipline won't make you a profitable trader - it will just keep you from losing real money until you become one.

Last edited by travis; Sep 9, 2009 at 3:44pm.
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Old Sep 9, 2009, 7:31pm   #16
 
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travis

you keep saying you don't have a decent discretionary method, yet you also keep saying "Or rather 4 times out of 5 I made money, and on the fifth time I lost everything I had made in the previous 4 discretionary trades plus much more". Potentially, 4 out of 5 sounds decent as long as you can ditch the killer 5th. 'Course if they were of the same ilk - going deeply offside then coming back to some profit (except the 5th) then you don't have a decent strategy. Otherwise, what was different about them and what conclusions have you drawn about the differences?

jon
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Old Sep 9, 2009, 9:25pm   #17
 
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travis 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 travis; Sep 9, 2009 at 9:46pm.
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Old Sep 9, 2009, 11:34pm   #18
 
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Quote:
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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Old Sep 10, 2009, 5:01am   #19
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Interesting thread. Im posting for a subscription.

Split
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Old Sep 10, 2009, 6:53am   #20
 
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Originally Posted by barjon View Post
...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 travis; 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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