my journal

This section of the forum is a gold mine. You will learn so much when people are given a chance to talk freely, opening up, and are confident it's their own thread so they won't be interrupted too often, or bothered. I found this great thread of this great person:
http://www.trade2win.com/boards/trading-journals/60252-trial-errors-journal.html

Yes, sure he describes how he lost 9000 pounds in a few weeks, but he's honest, sincere, open, and hard working in the sense that he's willing to share details, passion and efforts he's making. I find him great particularly because he describes perfectly the feeling that many of us have in our first years of trading. It seems easy, and we lose all our money very quickly.

So here is where I start my own journal, which I won't write every day, but only whenever I'll have some ideas and I can't find any better places to write them down (like on a specific thread where the ideas may fit better).

Up until recently discretionary trading seemed easy to me just like it does to the author of the above mentioned journal. This is how I lost about 50 thousand euros during 12 years, one thousand at a time, more or less. I've kep on doing discretionary trading for the whole of these past 12 years, despite losing every month. This tells you that I am much sicker than the average trading addict.

Anyway, in these 12 years, one way or another, I did manage to do something good in the meanwhile, while losing a few hundred euros a month with my discretionary trading (on average 350). What I did is I developed a few automated trading systems, that make money, and have been making money for a couple of years now. Problem is at the same time I kept on doing discretionary trading (on and off until a few days ago), because I kept trying to find a profitable method. It was like a personal challenge - something I must find out how to do after all these years. But nobody forces me to find out with real money, when I can use all the paper trading account. By the way this is the mistake I made for 12 years, and it's the same mistake that the author of the above mentioned journal has been making as well.

So, just to clarify on the important info on whether right now I am a profitable trader or not, I will say that I have been profitable for 2 years, but have lost almost all profits made via automated trading with my discretionary trading addiction.

That "addiction" or just "activity", has been decreasing lately. The more I find out with forward testing how good my systems are, the less I feel the need to "help" (and hurt) my profit with discretionary trading.

This illusion of always being on the verge of profitability with my discretionary trading has been kept alive for so long for the specific way I lose with my discretionary trading. I am profitable on 4 trades out of 5, and I lose everything I've made and more on my fifth trade. Needless to say, I hardly use any stoplosses, and certainly I can't say that I have a method, because if one is not profitable he also cannot say he has one method, because he keeps on changing his methods in order to find one that is profitable. And maybe that's the major mistake that one is prone to make with discretionary trading, because the fact that you're not profitable today, does not mean that method isn't profitable, and yet you won't find out if it was a good one if tomorrow you change method because today that method made you lose money.

This catch-22 (you won't be profitable until you'll have a method, but you won't subscribe to a method until you'll see profit all the time) happens because in our minds we can't keep track of exactly which methods we are using, and we can't keep track of how much money (in the days, months, years) that specific method has yielded us. So it's very hard to find a trader who'll stick to a method, realizing that it is profitable despite occasional losses. Unless someone else tells him, which would make things easier.

All this doesn't happen with automated trading: tradestation, excel, or another program, are there to help you keep track of exactly what method makes what profit. And you certainly will not use a method that is not profitable. This is why a discretionary trader could never become profitable (which is my case, so far), and an automated trader could be profitable from the beginning (which is also my case). If you add to this that with discretionary trading you can start without knowing anything about the markets or having to do any homework, whereas with automated trading before you can start you have to work your ass off for two years with programming and testing, then you know why I keep on repeating that automated trading is far superior to discretionary trading, and how it's much more easier to be profitable with it. And for today I am done with my "general purpose" preaching. Later I will write my actual diary with what's been happening lately in my trading.

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Some thoughts about the non-importance of psychology

What's the point of stressing so much the importance of psychology that I keep on seeing in the trading world? If you have a profitable method, you don't need psychology. And if you don't have a profitable method, psychology won't help you. The only psychology you need is to make sure you don't keep on trading with real money, when you don't have a profitable method. In other words, do not commit suicide as a trader. In other words, if you someone in your family, who, on a daily basis, is throwing money out the window, you send them to the psychiatrist. But psychology is useless otherwise.

To all these psychology preachers I say: give me a profitable method, don't help me understand myself, and you'll fix my psychological problems immediately. But you know what: maybe they know nothing about a profitable method, or are not willing to share it. Ok, fine - but then don't pretend you're trying to help me out.

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What's been happening lately in my trading

Well, what's been happening...
Basically all these systems I am using, as many as 24, make money every single week, maybe with one slightly red week every two months. But then also guess what. Say for example that my systems made x dollars in the past month. With my discretionary trading I've lost x dollars (that same amount). Sounds crazy? It's the truth. If you add that I keep on taking money out for my living expenses, you see why my trading account is actually shrinking, to the point that I cannot trade all the systems anymore, but am limited to the best ones (hopefully I identified them correctly).

I am gonna hang in there and hope for the best. It would be a great step ahead if I finally understood once and for all that discretionary trading with real money and without a profitable method doesn't make sense (especially if a reliable paper trading account is available, which is the case). This insane "addiction" to trading has been decreasing at least.
I began in 1997.
From 1997 till 2007 all I did was discretionary trading (and losing), while developing at the same time my trading systems.
In 2008, I did both: losing with discretionary trading and making money with automated trading, without even making a point of NOT engaging in discretionary trading and thinking I was "helping" my systems.
In 2009, I've realized the problem and have been trying to solve it, but don't think I have yet.

Two major problems I face are these:
1) It's hard to accept that since I created profitable systems I am actually still unable to trade profitable without them.
2) It's hard to accept the feeling of quitting for me. There's the good feeling of quitting an addiction, but there's a bad feeling of quitting an endeavor, especially when I feel that I am this close and when I feel that I could use the extra money made with discretionary trading.

However, there's also no excuse for not paper trading until you're sure that you've found something that works. I have been too arrogant in thinking for all this time that I was ready to make money, and that's why I never learned maybe. Too impatient and cocky. I wonder if I can learn from my mistakes, or if maybe I just don't want to make money and wish to stay at breakeven forever. But this latter could just be an excuse for justifying my lack of profitability by saying "if I don't make money, it's only because I don't want to", just like children say "i didn't even try, or I would have won". One should be careful when speaking of "self-sabotage" because it's unlikely to be the case, and it's more likely to be a bull**** explanation.

More thoughts on the nature of discretionary trading

The problems of discretionary trading without a profitable method are countless and many of them are indeed related to psychology - but at the same time psychology is still not important because, once you have a clearly defined profitable method, psychology is useless, and if you don't have it, psychology is again useless... however now I see that it's more complicated than that, because most discretionary traders - even profitable ones - do not have such univocal rules or else we couldn't even call it "discretionary" trading.

So I have to reconsider almost everything about "discretionary trading" that I wrote in my earlier post. If it's called "discretionary" it means it is not a univocal set of rules, in a sense it is not even a method. Or rather, we could say there's a fixed set of rules, and a few discretionary choices left to the trader's intuition, that for one reason or for another, could not be translated into fixed rules, which would be the optimal thing to do (and with all fixed rules, it would be the same as automated trading, only manually executed).

But even those "fixed" rules, aren't they breakable? That is an important question. I heard some profitable traders even say that they will allow themselves to break some of the "fixed" rules and make exceptions. So in this sense they must be doing consistently something that is profitable since they make money, except we can't call it a "method" since they don't even know what exactly they are doing, if not a vague "I must respect most of my rules".

You see at the same time that the more things become vague and undefined the more a profitable trader is at risk, should his psychological makeup change (this time "psychology" indicates something beyond our control, that can't be figured out).

Despite all these things that I had to re-examine and that I explained mistakenly in my previous post, I have now finally established, that unlike automated trading, discretionary trading is not univocal and therefore does have a lot to do with psychology. However, it is not the same psychology we're talking about, because as we get more and more into details we see that many profitable traders allow themselves to break all rules in their method (if we can call it so), and only call it "lack of discipline" when breaking that rule caused them a loss, but do not call it anything if breaking that rule caused them to make money.

In many ways, I sense that "psychology" is just a broad and misleading term, misused by all discretionary traders (profitable and unprofitable) because they simply are not clear about what they do when they trade.

Indeed, if a discretionary trader (profitable or unprofitable) does not use a stoploss, he will call it "lack of discipline" when such choice leads to a loss, and he will call it "my winning intuition" when such choice leads to a gain. It's reasonable to not be logical and to not make sense sometimes even if you are successful as a discretionary trader. If you asked the best driver in the world how he does it, he may do a horrible job at explaining how you should drive, whereas a worse driver could be a better teacher.

Let's see if I can synthesize for future reference.

When trading you can engage in:

1) automated trading, where there are fixed and univocal rules that lead to profit, so you don't have choices and therefore the psychological impact tends to zero.

2) discretionary trading, where, by definition, there are general principles (meaning rules that can sometimes be broken and interpreted) that are subject to discretionary interpretation. However, despite appearances, the importance of psychology here is much less than what it is said to be, and the term "psychology" is usually misused to account for all mistakes leading to losses.

Traders, mistakenly, use "psychology" to explain unprofitable decisions they made due to wrong but rational and even reasonable appraisals. If you lost money because you didn't apply the stoploss, most likely it's because you weren't sure, from your past experience, that stoploss in that case was a good idea, and not because you were undisciplined. Most likely, given what you knew about the market, that was a reasonable choice to make and not an "undisciplined" one. If it works, you forget about it, and think everything is fine with your psychology. Yet, if it doesn't work, you call it "lack of discipline". As a consequence, at the end of the day, you think all your wins are due to your profitable "rules" (which you actually bend every which way), and you blame all your losses on not following those same "rules" due to "psychological" problems. Instead of saying, logically, "I still have not completely figured out how the markets move and therefore some of my choices are profitable and some are not", you think "I got everything figured out, but what screws me is discipline". It's an illusion. Of course every time you lose it's because you didn't respect some of your twenty or more rules. But also, every time you win it's because you didn't respect some of those same rules for the very fact that, to be precise, they are principles and not rules (if they were rules your system would be automated, and psychology would be zero). So the bottom line is you lose because of a bad call on the market, and not because of discipline and psychology. I don't know what else psychology could account for, but I agree with what I said in my previous post once again, even though on different grounds, that psychology in both types of trading does not matter. If you lose it's just a question of making the wrong discretionary choices (since we have established that a "method" does not exist, so there's really no univocal rules to be followed or broken).

I think I made a logical mess because I was trying to be too precise and scientific and to explain everything, so I will say it all again in simple words, my "essay" on psychology and trading. Ignore everything you've read until here.

If you do automated trading, all choices are already made, so psychology is zero. If you do discretionary trading, all choices are potentially "discretionary" and the less your method is "univocal" the more psychology will play a role. The heavier is the weight of your choices and their quantity the more you run the risk of being worn out, and even going crazy.

However, just because discretionary trading is discretionary and therefore all "psychological", since all inputs come, continuously, from your mind (whereas automated trading cannot be defined "psychological" especially considering that you can even let your systems run unattended), we should not mistakenly assume that all our mistakes are due to psychological issues, such as self-discipline. Most of our losses are in fact due to bad calls on the market, bad calls on our entries and exits, and therefore they are due to limits in our skills and knowledge of the markets, or also our knowledge and memory of our trades - they're not at all issues of self-discipline. Yet they are wrongly attributed by many discretionary traders to psychology. An ignored stoploss, when it leads to gains, is considered a well-chosen exception to our rules. When it leads to losses, it is not a bad appraisal, but it becomes an issue of self-discipline, personality, sometimes even called "self-sabotage". Wrong, wrong, wrong. Can't blame everything on psychology.

To be even clearer the following are not "psychological" causes of losses:

• not using a stoploss (you don't use it when you are uncertain whether it's good, because too many times it made you get out of a good trade)
• taking profits too early (you're doing it, because too many times a profitable trade turned into a loss)
• letting a position run unattended and letting it turn into a loss (you do it, because often by staring too much at a position, you mess with it, and ruin a profitable trade)
• "revenge trading": yes, this, too, is not necessarily a psychological mistake (you do it because often when you're mad because of a recent loss you are actually so focused on getting your money back, that you do get it back)

Yet, all of the above, are often called illogical irrational choices, due to a lack of self-discipline or even due to issues of self-sabotage. Well, I say "bull****". We, as discretionary traders, do those things because we actually think they will work. Only, mistakenly, when they don't work, we say "oh, I'm so undisciplined". Well, once again "bull****". It was just a bad choice, which other times worked. And, if we are overall unprofitable, it's not due to psychology but to the fact that we are not skilled enough.

Something i use to find is that when i made $50 bucks, sub-consciously i would be like 'Great! I can do a bit of gambling and maybe make a fortune and boast about it' Then i'd immediately proceed to lose the $50.

Just thought that related to your losing money in discretionary trading.

Yes, thank you. That is a good example of what happens with unprofitable discretionary trading, in my opinion when you still do not know what works (what is overall profitable).

What we don't know however is if, back then, had you thought something other than "great..." and so on (gambling mentality), your next trade would have been more likely to be profitable. My guess is that even if you tried your best, you still would have lost and not be profitable (overall and in the long run, because the next trade could be just luck or bad luck). In this sense I said that psychology is not the cause of our unprofitability but only a faulty explanation we use for our unprofitability, whereas the correct explanation is that we don't know what works. Most likely, back then, if you had known a profitable method, you would have used it.

When we don't know what works, we are rationally encouraged to try new things in all possible ways and even at the risk of making all sorts of mistakes and then later we will mistakenly call psychology the cause of these losses - mistakenly so, because all this happened in the first place because we did not know what behaviour was the (overall) profitable one. So the cause of unprofitability was not our trying new things (or not applying stoplosses for example, which makes sense if stoplosses do not seem to work), but the cause was indeed our lack of trading skills. Who would be so crazy not to use a stoploss that is proven to work? Very few. The reason so many do not use stoplosses (and later, when they incur into losses, blame them on psychology and self-sabotage) is that they don't know exactly if and which level of stoplosses yield a profitable outcome in the long run. And they do not know, because they are not skilled enough as traders and do not know what works - not because they know and yet want to keep on losing, which is the explanation most people are giving themselves on psychology forums.

I say this with much confidence, because I've seen it happen to myself many times. Blaming myself for self-sabotage, whereas if I didn't use stoplosses is because I wasn't really sure they worked - in fact I had no idea what method was profitable and of course, given that situation, I kept on trying different things. It's hard (not impossible) to keep in your mind enough things to find out what works, in a discretionary way. It's very easy instead to do it with automated trading, by back-testing and forward-testing your systems. At least that is the only was I could find.

I know there will be many objections, but unfortunately I have to generalize in order to make some general statements. If I went after all details and exceptions, I could never make any general statements, which are very useful. That's why I am using this journal section, so I can speak freely and at length without encountering too many objections and criticism. This way I can go further with my train of thought, and the few good-intentioned ones, willing to read my entire posts can still follow and participate.

Ok, great place to be. I can write as much as I want and not be off-topic.
Today I tried testing a so-called "volatility breakout" system on tradestation. The data I had wasn't very much, because I felt that I needed a one-minute timeframe, so the file got really heavy with just one year. Anyway, I found something worked, but not well enough. And I know that if things don't work well enough, there's no point in trying to force them to work by over-optimizing my parameters. So far I would say that, at least with my limited tools and speed of execution, breakout systems are not where the money can be made. I mean, I found better solutions elsewhere already, so I don't think it's a good place to look. The idea sounded great, but it doesn't work that well. Yes, it does clearly make a profit, but overall it's not worth the big effort that a frequent time-frame requires and so on.

Hey, check this out.

I just relapsed into my trading addiction and lost me another 100 dollars (which is a miracle because I was down 800). I can't believe I've been losing money for 12 full years and still haven't healed from this addiction. I make money with my systems, but I gotta lose it with discretionary trading.

Pretty much, I can trust myself and I'm in control in every area of my life (I am a "control freak") except in this one - trading. Here I just keep on hurtin myself, irrationally.

Or maybe it's not like this. Maybe no one is really in control of all areas in his life, and no one is really acting in his best interest in ALL areas of his life. But in trading, the thing is immediately apparent because you lose money.

For example, I don't get enough sleep at night. And each morning I say "tonight I'll go to bed earlier" (how many of us do it? many...). Then when it's time to go to bed, I just postpone and go to bed late again. This means I am not in control, and I am not doing my best self-interest for one reason or the other (not enough time to get into that) just like for trading. Except in this case no the damage done to myself is not as apparent as it would be for trading.

I guess trading is similar to boxing or something like that. If you are doing anything wrong it's gonna hurt you and you'll realize it immediately. In other fields, we can deceive ourselves and think we're doing everything perfectly and we're in full control, but the truth is that we are not. Eating, sleeping, drinking, smoking... countless examples in everyone's lives of not being in total control. But if you have a trading addiction, then it will show. It will appear to you, immediately. Smoking and similar are just the same, but socially they're ok, because the damage is more limited. A guy with a trading addiction endangers himself and his family, potentially causing disaster overnight (unlike smoking).

Trading in this sense is teaching me a lot about myself. It speeds up the process by punching me each time I am doing something wrong. Trading teaches you psychology, but psychology doesn't teach you trading for **** (to get back to my earlier posts).

Can I heal this? No. I haven't learned to go to bed early in my entire life: how am I gonna heal this trading addiction? I guess I'll just have to live with it, being aware that I have it. Or maybe I'll heal it by realizing that I have it. Again, guess not. I still go to bed late and I am tired in the morning, even though I realize I have this problem, and even though I am taking these precious melatonin pills. **** me.

Travis,

As a matter of interest, what timeframes do you trade when you use your discretionary method(s), and is it different from that used in your mechanical method(s)?

Also, if you don't mind my asking, what sort of a diet are you on? (I wondered this after you mentioned melatonin and sleep).

I am on a regular diet, so no specific "diet". I eat minestrone every day, or boiled vegetables, then some meat or fish every once in a while. Not much fruit. Milk, one liter a day. Some cereals, with it. Every once in a while I get drunk or buy sweets, just like once every two weeks.

Timeframe of my evil discretionary trading varies. If it works, it lasts shorter than if it doesn't work. I cut profits and let losses run, the worst possible trader I could be. I can't help it. If it works (4 wins out of 5 trades) they last about 30 minutes. If they don't work (one out of 5), I hold the loser until I pretty much blow out my account or can at least get to breakeven (like today). I am really the worst discretionary trader there is. I could never find a method that worked. Even if I used stoplosses which clearly is not the case, I would lose every day. I am mostly impatient, I would say. I simply shouldn't trade, but at least once every two weeks I feel the urge to do so. I can't seem to cure it.

As an automated trader, there are 24 systems running, each makes one trade per day, each trade lasting a few hours to a whole day. Definitely different time-frames. Also, if I tried to trade the automated system manually I certainly couldn't do it, because as I said I am quite impatient. I would definitely exit early if I am making money, and exit late if I am losing money, most likely doubling up on losing positions. A few times I carred losing positions in future contracts until their expiration, and blew out my account or close to. The only thing that stopped my trade was the expiration of the contracts. I feel paralyzed as soon as my trade becomes unprofitable, even by 20 dollars. I can't close it anymore. This doesn't happen with automated trading systems.

Thanks for replying Travis. What I was getting at really was what TF charts are you trading off?

I am about to PM you, so perhaps you might look out for it in due course.

travis said:

.................Can I heal this? No. I haven't learned to go to bed early in my entire life: how am I gonna heal this trading addiction? I guess I'll just have to live with it, being aware that I have it. ...................

Click to expand...

travis

Why not just go with it? Open a "play" account with limited funding so that you can only take relatively small positions and then have your discretionary fun to your hearts content ( well, 'til you have to top it up anyway 😀 ).

good trading

jon

Thanks for your advice. Unfortunately, my money by now is so limited that a "play" account would be 300 dollars, and so I cannot trade futures with it. Of course, maybe I am lucky not to have had a million because by now I would have lost it all. Then another option would have been to paper trade but the problem of the addiction is that I feel that I will make money so I trade with real money on purpose. I think in this area and in another areas of my life, as I said, I have a problem with acting in my own self-interest. Why do I go to sleep late every night? I haven't been able to fix it...

It's very interesting. Today, depressed about yesterday's relapse into discretionary trading, I was browsing on a pretty good web site where a trading expert writes on the basics of trading and as usual he has a section about "psychology and trading".

He starts off by saying, as usual, that in trading, discipline is very important. And discipline - he says - means adhering to rules of entry and exit.

Now discretionary traders generally trade by instinct but, I agree, they might have a a given number of fixed rules to follow.

But then a problem arises: because of the elements of improvisation, freedom, flexibility of discretionary trading, you can say that your method has worked in the past, but you cannot back-test it and you cannot say whether it will work in the future, since your profitability as a discretionary trader is partially based on your intuition. So, even for a discretionary trader who has been consistently profitable, you cannot say "discipline brings profit", because also "intuition brings profit", since his system is based on both fixed and flexible rules.

Now, as stated, the utility of discipline is partial even for a discretionary trader who has found a profitable discretionary (flexible) method.

What happens if the trader doesn't have a profitable discretionary method yet?

If you are a discretionary trader and still do not have a profitable trading method it doesn't make sense to tell you to be disciplined in following rules, since you do not know what rules are profitable. And yet these experts are talking precisely to those traders who do not have a profitable method yet. "Always use a stoploss" they say. But a stoploss alone doesn't guarantee anything. If it's placed in the wrong place it could make you unprofitable. And so on.

They all say that "you don't make money because you are not disciplined and don't use a stoploss" or similar, but the truth is that you'll lose money even using a stoploss. You'll lose money until you'll find out where it is profitable to place that stoploss, and where to enter and exit. Also, you will not be using a stoploss in a consistent and disciplined manner if you are still testing out where that stoploss should be placed - so it makes no sense to prescribe discipline to you if you still do not know what's the profitable thing to do.

What instead they should prescribe is "paper trade until you find a profitable method, and find out as many fixed rules as you can, leaving as little as possible to discretion". That is, if any, the way to go with discretionary trading.

Saying "always use a stoploss" doesn't lead to profitability. "Find out where it's profitable to place a stoploss" with trial and error or better yet with back-tests (which is hard with discretionary trading) is what should be told.

Once you find out what works, it's effortless to follow those rules. If you don't know what works, it doesn't make sense to tell you to follow some general rules, which could be applied in very unprofitable ways (stoploss, trailing profit, and so on). Psychology does not bring profitability. Testing different things until you find something that works brings profitability. And then, once you find it, psychology is useless.

Psychology is useless, discipline is useless. What you need is a clearly outlined profitable method. Then, of course, you'll follow it.

What this talk about psychology and discipline causes is just confusion in the minds of beginning traders, because they use the stoploss, see that it doesn't work, and stop being disciplined. Of course, why should you use something that doesn't work? They start being insecure, and losing track of their progress. It then becomes hopeless. The best way to keep track of your progress is automated trading, which means only dealing with fixed and univocal rules. Discretion screws the whole thing up, and forces you to keep track of changes and improvements by estimate and in your head, which in most cases proves impossible. Only few can achieve consistent and permanent profitability through discretionary trading, because of their ability to keep a clear idea in their minds of their whole trading career (all the stats).


Now, how does all this apply to me? I have an automated system and I use it. So far so good. No psychology needed here. Once I realized that it worked, I started using more and more.

But I have a trading addiction which has kept me trading for 12 years even though I never found a profitable discretionary method. It's a wonder how stupid I am for not finding one, and it's a wonder how sick I can be for not quitting this addiction. But discipline only comes into play in quitting here, not in making me profitable in ANY way. The only discipline would be in quitting, get it?

travis said:

Thanks for your advice. Unfortunately, my money by now is so limited that a "play" account would be 300 dollars, and so I cannot trade futures with it. Of course, maybe I am lucky not to have had a million because by now I would have lost it all. Then another option would have been to paper trade but the problem of the addiction is that I feel that I will make money so I trade with real money on purpose. I think in this area and in another areas of my life, as I said, I have a problem with acting in my own self-interest. Why do I go to sleep late every night? I haven't been able to fix it...

Click to expand...

Sorry about the low funds situation. Can relate to that. However, I am slightly confused as I thought that you had a successful mechanical system or systems, which was presumably bringing in income (even if this later got blown on the discretionary trading).

On your subsequent posting about rules, psychology, etc, I don't claim to be an expert...as it says in my sig I'm still learning my trade...but reading more experienced traders on here, I get the impression that they have a framework of rules which they generally stick to, but years of experience can tell them when to override their own rules. I think this is true of any area of expertise actually.

As in the refrain from the old Status Quo song, "Everybody has to sometimes break the rules".

On the other hand, if one always breaks the rules then the frame of reference disappears, like navigating without chart or compass.

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.

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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.

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

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.

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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".

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

travis said:

.....................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..........................

Click to expand...

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

Interesting thread. I´m posting for a subscription.

Split

barjon said:

...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 ...

Click to expand...

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.