2 years in the game... is it time to hang up my boots?

[TheBramble]

I posted elsewhere this morning on the subject of trading ‘edges’ and am far too modest to post the link here, but my point there was to keep on keeping on, BUT (big but, geddit?) only if you have a tried-and-tested system which is consistently, on aggregate, over time, providing a profit. Riding the losing streaks is key.

But to keep on keeping on when you clearly have had no feedback to indicate your strategy is going to pay you a profit is not a sensible strategy. This is not a losing streak – it is a losing system.

Stop.

Get a non-trading related income if you don’t have sufficient funds to cover you for the next few years.

Research what works. Develop a simple trading system around those few, basic principles of what works. Trade that system.

 

[DionysusToast]

I agree & disagree with you Bramble. All comments in this post relate specifically to the SPORT of day trading.

No-one learns a set up and gets profitable from it. They learn a set up and then get better at executing that setup. By getting better, I mean they get better, through experience of recognising when the setup should be taken and when it should not.

I haven't seen anyone make money that doesn't have a good 'feel' for the market. In fact, the feel is probably more important that the setup.

The set up may or may not be good. We have not seen statistics here on how many setups occure per year and how many work and how many fail. Let's say this is a 50/50 setup, this is perfectly tradeable IF you add something to it in terms of feel for the market.

My opinion is well known - a 50/50 setup PLUS tape/order book reading abilities is all you need, although I am open to using something other than tape/order book as long as there is an additional dimension brought in, on top of 'setup'.

That's just me though.

 

[bedsit]

My basic strategy was
- look for inside bar breakouts on daily- also look for pinbars off horizontal support/resistance or fib levels
- risk 1% or 0.5% of account per trade
- use 21 and 100 day EMA as support / resistance levels as well as horizontal lines drawn off 4H charts
- trading majors and yen crosses
- look for 3:1 risk reward targets- put stops around 3-day hi or lows - or use EMA lines and fib s/r for stops


and that (pretty much) remains my strategy to this day, although I use a lot of discretion and tend to watch the breakouts occuring over the 15min charts, it still forms the basis for my trading strategy.

So where am I today?

Pretty much Even-Steven.
I certainly haven't made any money, I have probably lost around 4-5% of my account all up at the time of writing.
Over the two years, my maximum drawdown was probably 15%, my maximum high point was around 20% gain on the account.

I kept accurate records of all of my trades, trade by trade, month by month,Jon.

‘Pretty much Even - Steven’ after 2 years of trading?
I’m not sure about precise number, but would have guessed you are better than 90% of retail traders.

From a brief read through your post my conclusion is that you are a disciplined trader with some sort of trading plan. You mentioned IB set ups - maybe I trade them in a different way (sort of symmetrical triangles) and couldn’t give any advice about success rate.

One of the things I would try to change is risk/reward = 1/3. I don’t know - to me looks a bit over the top. That kind of risk/reward or better I may use occasionally for certain patterns (h&s, break out of a tight range etc) For Fib levels I feel more comfortable with 1/1 or going for the next important level.

Maybe you should do some analysis and try to adjust r/r to see how that change affects the account. From my experience (FX day trader), most of the time anything better than 1/1 affects winning rate and overall profitability.

I think you are on the right way to make it as a trader so far as you stick to your good discipline. A bit of fine tuning may change your account performance nicely. Good luck.

 

[DionysusToast]

R:R is a bit of a daft concept.

Risk : Set your stop losses based on your trading statistics. For every winning trade, look at how far they went against you. Base your stops on this analysis.
Reward : Can't be known anyway. I'd advise scaling out, so you don't have a fixed reward. You can scale out 3 or 4 times. Much better in my opinion, especially easy on the emotions...

 

[bedsit]

R:R is a bit of a daft concept.

Risk : Set your stop losses based on your trading statistics. For every winning trade, look at how far they went against you. Base your stops on this analysis.
Reward : Can't be known anyway. I'd advise scaling out, so you don't have a fixed reward. You can scale out 3 or 4 times. Much better in my opinion, especially easy on the emotions...

Agree, so far as you don’t go for worse than 1 to 1.

 

[swillette]

Jon,
I agree with Black Swan--in order to get proficent at anything, you have to give it time. Anything that I have ever mastered has taking me at least 5 years. I have been trading the Forex for 3 1/2 years and I am still not where I want to be.

Read the book Mastery or The Talent Code. I think they will inspire you to hang in there.

Steve
the4xjournal.com

 

[Pat494]

I find setting stops is really only if you have to go out. But if you have to, then use bollinger bands. Usually it will bounce here but if it doesn't you will be better out altogethor.

 

[BlackBison]

Well Jon the fact that you have broken even for 2 years is not itself a problem (I lost money for about 2 years when I started trading). One trader I know lost for a long period of time and lost serious amounts of money (6 figures) before they figured out what they were doing.

What I do, however, find slightly alarming is that you appear to just be doing the same thing expecting different results. Over my first 2 years I was constantly trying out different strategies that I read about or created myself through observation- I was slowly evolving as a trader, despite my lack of monetary results.

You need to be more dynamic in your trading- the market does not owe you a living. If what you are doing is not working then you need to adapt otherwise you will get nowhere. Do not get stuck in the same tired old routine expecing some sort of magical transformation overnight. I have seen many people with this attitude across various walks of life as well as trading and they never seem to progress.

With regards to your R, mine runs at about 1 on average. I know a level trader similar to me who runs a 0.5 R (stops twice as big as the targets) on average and they do very well. The 'high R required to be a profitable trader' nonsense you read about on some forums is one of the most damaging myths in trading today and one of the main reasons I did badly to begin with.

Sorry if this has sounded a bit harsh, its my honest opinion. Good luck with whatever you decide to do anyway.

 

[Hotch]

Agree, so far as you don’t go for worse than 1 to 1.

Casino's have R:R worse than 1 to 1

 

[j b]

Casino's have R:R worse than 1 to 1

They also have an edge...

 

[spreader_legger]

I think you should read Covell's book ..... I heard he is quite a bit of a legend

This is easily the best advice. Unless you have another source of income, I would take it if I were you. It could easily be another few years before you come close to being profitable and that is assuming you are actually cut out for this, something you aren't even sure of yourself having jumped in with both feet. I think it is utterly reckless for people to encourage you to keep going, or read another book, or add another pretty coloured line or timeframe or system etc...wtf?

 

[breadman]

2 years in the game... is it time to hang up my boots?
-

Hey guys.. this is kind of a long story but I will try to make it as short as possible

2 and a half years ago, in June 2008 , I started day-trading full-time.
My previous experience with the markets had been as a long term investor in the ASX, buying (and occasionaly selling) various stocks.
In the first 6 months of 2008 I had started to play around with CFDs and Options.

So without too much hesitation I quit my full time job and decided I would try to make a living trading CFDs.

I read some books,(swing trading, candlestick analysis, trader bios, etc) attended a few seminars, went through a stack of online-presentations to do with technical analysis, trading discipline, trading forex, etc

And within a few months I found myself focusing mostly on trading forex, using a price action strategy with the focus on breakouts on the Daily chart.

My basic strategy was
- look for inside bar breakouts on daily
- also look for pinbars off horizontal support/resistance or fib levels
- risk 1% or 0.5% of account per trade
- use 21 and 100 day EMA as support / resistance levels as well as horizontal lines drawn off 4H charts
- trading majors and yen crosses
- look for 3:1 risk reward targets
- put stops around 3-day hi or lows - or use EMA lines and fib s/r for stops


and that (pretty much) remains my strategy to this day, although I use a lot of discretion and tend to watch the breakouts occuring over the 15min charts, it still forms the basis for my trading strategy.

So where am I today?

Pretty much Even-Steven.
I certainly haven't made any money, I have probably lost around 4-5% of my account all up at the time of writing.

Over the two years, my maximum drawdown was probably 15%, my maximum high point was around 20% gain on the account.

I kept accurate records of all of my trades, trade by trade, month by month,
here is a summary and a graph

Stats drawn from every trade I made between Sep-08 and Jul-10
(total about 650+ trades. Which makes about 25-30 trades per month)
(includes trades on all CFDs stocks, commodities, indices... MOSTLY FX trades but also includes other instruments.)

Average Win: $322
Average Loss: $155
Win%: 31%
Payoff Ratio: 2.18 (winners : losers)

Winning Months: 7
Losing Months: 14

The average month was around a 2% swing in either direction, I had 4 'big' months where I went up or down around 9-12%

(I hope that picture comes out okay?)
--

Looking back, how could I have improved my trading method?
Well , honestly I think there are two main ways that I got burnt.
1) Going for 3:1 payout, was too ambitious. I think a 2:1 or even 1:1 is more realistic. In other words: Smaller targets.
2) Trading with tight stops, and having a lot of small losses. Most times I would rather "give the trade room to breathe" and get stopped out at a loss than 'break even' or take a small gain. I think this is probably more related to my targets than my stop-losses. In other words: Less big wins, more smaller wins and breakevens.


Now I don't have the resources or time to go through every trade and check whether i ACTUALLY WOULD have ended up with more $ if I had modified my system as mentioned above, it's just my 'intuition' that I would have been more profitable.
(Smaller $ wins, higher win %)

For a few years I was really convinced that high-payout ratio targets and accepting a below 50% win ratio was the only way to be really profitable.
Now I am not so sure.

--

So ... this is where I stand.

I have had a lot of screen time over the past few years, and I recently started playing with Options and fixed-odd betting on forex recently, (with a win rate of around 60% on fixed odds betting)

The benefits of options+fixed odds is that... I can't get stopped out if I'm wrong by 1 pip (for instance) and I tend to be correct more often than I am wrong.

(Whereas when I was trading spot Forex, I tended to just get stopped out a lot of the times when I was 'correct' ... not whinging about this I'm just saying that the mechanisms behind FX Options and fixed-odds FX bets means you can't get stopped out... they have their disadvantages too.)


However apart from the odd trade here and there, I'm not sure where I stand on my career as a day-trader.

I don't believe that my system (as described above) will ever be CONSISTENTLY profitable over long term and as a day-trader I MUST be CONSISTENTLY profitable as my livelihood depends on the steady income rather than praying for a few big wins every 3 months.

So where do I go from here?
Is it time to hang up my boots?

Is it merely a case of just tweaking my existing system?

I have heard it said that many people who trade take 2-3 years to become profitable. Also I have heard it said that most traders lose their accounts ...

Well I risked a large amount and I haven't lost my account (i'm pretty much square) and based on my risk management, I don't think I would ever lose my account... I would keep treading water. Even Steven.

so does this mean I actually should just keep sticking it out and I will eventually turn into a profitable trader?

I don't know.

I would appreciate some guidance

regards
Jon.

hello jon,
i have not gone through the hole thread so i am not sure if someone has already said this but, what about doing the same system but the other way round. You have twice as many losing months as winning months and you have three big winning months. If you could find away of stopping the three big winning month results the reverse system would have made you money, also the losing trades which were stopped out did they continue going aganist you after being stopped out.

 

[meanreversion]

hello jon,
i have not gone through the hole thread so i am not sure if someone has already said this but, what about doing the same system but the other way round. You have twice as many losing months as winning months and you have three big winning months. If you could find away of stopping the three big winning month results the reverse system would have made you money, also the losing trades which were stopped out did they continue going aganist you after being stopped out.

Genius. Basically work out how to stop the unprofitable trades and you'll make money. t2w is a font of knowledge ....

 

[SanMiguel]

I find setting stops is really only if you have to go out. But if you have to, then use bollinger bands. Usually it will bounce here but if it doesn't you will be better out altogethor.

Have to be careful with those.
Bollinger bands will force you to trade back to the mean but you need to know when you are caught in a trend. Fact is most people who trade them end up shorting and reshorting uptrends.

 

[SanMiguel]

The 'high R required to be a profitable trader' nonsense you read about on some forums is one of the most damaging myths in trading today and one of the main reasons I did badly to begin with.

.

It's not necessary but it certainly helps new traders get out of trouble.
Fact is, you can never know the true R you will get out of a trade, you need to be nimble enough to scale out of a trade. However, if your strategy or your decision making is 50:50 then1:1 won;t work.
You should keep stats of your trades and after 100 trades, work out your average win ratio and RR to readjust...even if you use different strategies or have a haphazard way of trading this will give you some idea.

 

[vimal1]

Jon. Hi. For me its pretty much simple from what you have said above. I think the missing piece is 1) To objectively test (via coding) the strategy you have laid out if that is possible and 2) To add at least 3-4 additional strategies to the mix and trade a portfolio of strategies.

If you want to discuss, feel free to PM me and we can talk on the phone

Regards

 

[safvan]

Hi Jon

I uselessly tried day trading for sometime before doing more research and actually using my brain to figure out what the game was before quitting it and focusing solely on long term.

It has become extremely hard now days to be profitable long term with day trading as you are mainly competing with computers that can make more logical fixed principle calculations per micro second than a human can do in years.

When I experienced this I just stopped everything and started to think on where things were wrong. Few things *I* realized that big money cannot be made day trading. If the BEST traders and investors in the world cannot do it and have given valid reasons then who am I to question it? I can but frankly I am in the business to make money and then sleep tight and not invent the wheel.

The most money goes into only small group of businesses and financial instruments and they form what we call strong trends to show that. As traders or investors our job is to minimize overhead costs (more revenue less costs) or technically over head resistance.

Instead of fighting both support and resistance, why not select instruments that offer only support but no resistance OR only resistance but no support and then ride the trend until the money flow gets disinterested? This way you do not have to fight daily battles with thousands of others like you who are trying to play a game of tug and war.

Take EURUSD for example currencies are extremely volatile but yet real money making opportunity in this pair was seen recently in 2006 and 2007 only where it showed signs of strong upward trend. 2008, 2009 and 2010 were pretty much down or side ways markets YET we have seen more people jump into currencies and other mediums (thanks to low entry barriers and effective marketing campaigns) than any other in the history.

What I do is look for strong UPWARD trending markets only. Right now you could say Gold, Oil, Copper, Coffee etc are in strong trends so if you really want to play around with leverage then position trade them NOT day trade. The computers are programmed to wipe out small traders only daily basis in these markets.

I personally trade only all time high stocks and ride the trend till it dies. It REALLY does give you results. The money you can make in two to six months keeping one correct position is better than going in and out 30 times per day.

If you like a small burger shop in your area you would go there every day and tell others too. Very soon all people in town would go there and this is where the main money would flow. Invest or position trade money is flowing in and not going out.

Having said that even in bull markets (strong trending bull markets) there are only two to three times a year where real money is made by the best in market. Once you are in a winning trade do not get out until the money starts flowing out and it can be confirmed in the form a trend change on DAILY or weekly charts. Its better to give your money to charity or directly to broker if you want to trade anything below daily.

The markets require liquidity from suckers that day trade so that a small number of traders and large institutions can make big money. Be part of that group and not the other way around.

Peace

 

[Black Swan]

Hi Jon

I uselessly tried day trading for sometime before doing more research and actually using my brain to figure out what the game was before quitting it and focusing solely on long term.

It has become extremely hard now days to be profitable long term with day trading as you are mainly competing with computers that can make more logical fixed principle calculations per micro second than a human can do in years.

When I experienced this I just stopped everything and started to think on where things were wrong. Few things *I* realized that big money cannot be made day trading. If the BEST traders and investors in the world cannot do it and have given valid reasons then who am I to question it? I can but frankly I am in the business to make money and then sleep tight and not invent the wheel.

The most money goes into only small group of businesses and financial instruments and they form what we call strong trends to show that. As traders or investors our job is to minimize overhead costs (more revenue less costs) or technically over head resistance.

Instead of fighting both support and resistance, why not select instruments that offer only support but no resistance OR only resistance but no support and then ride the trend until the money flow gets disinterested? This way you do not have to fight daily battles with thousands of others like you who are trying to play a game of tug and war.

Take EURUSD for example currencies are extremely volatile but yet real money making opportunity in this pair was seen recently in 2006 and 2007 only where it showed signs of strong upward trend. 2008, 2009 and 2010 were pretty much down or side ways markets YET we have seen more people jump into currencies and other mediums (thanks to low entry barriers and effective marketing campaigns) than any other in the history.

What I do is look for strong UPWARD trending markets only. Right now you could say Gold, Oil, Copper, Coffee etc are in strong trends so if you really want to play around with leverage then position trade them NOT day trade. The computers are programmed to wipe out small traders only daily basis in these markets.

I personally trade only all time high stocks and ride the trend till it dies. It REALLY does give you results. The money you can make in two to six months keeping one correct position is better than going in and out 30 times per day.

If you like a small burger shop in your area you would go there every day and tell others too. Very soon all people in town would go there and this is where the main money would flow. Invest or position trade money is flowing in and not going out.

Having said that even in bull markets (strong trending bull markets) there are only two to three times a year where real money is made by the best in market. Once you are in a winning trade do not get out until the money starts flowing out and it can be confirmed in the form a trend change on DAILY or weekly charts. Its better to give your money to charity or directly to broker if you want to trade anything below daily.

The markets require liquidity from suckers that day trade so that a small number of traders and large institutions can make big money. Be part of that group and not the other way around.

Peace

good post this.. Althuogh I dont believe only dailys will give you results...imho you can spot trends (FX) from as low as 2HR TFs

 

[SanMiguel]

Hi Jon

I uselessly tried day trading for sometime before doing more research and actually using my brain to figure out what the game was before quitting it and focusing solely on long term.

It has become extremely hard now days to be profitable long term with day trading as you are mainly competing with computers that can make more logical fixed principle calculations per micro second than a human can do in years.

When I experienced this I just stopped everything and started to think on where things were wrong. Few things *I* realized that big money cannot be made day trading. If the BEST traders and investors in the world cannot do it and have given valid reasons then who am I to question it? I can but frankly I am in the business to make money and then sleep tight and not invent the wheel.

The most money goes into only small group of businesses and financial instruments and they form what we call strong trends to show that. As traders or investors our job is to minimize overhead costs (more revenue less costs) or technically over head resistance.

Instead of fighting both support and resistance, why not select instruments that offer only support but no resistance OR only resistance but no support and then ride the trend until the money flow gets disinterested? This way you do not have to fight daily battles with thousands of others like you who are trying to play a game of tug and war.

Take EURUSD for example currencies are extremely volatile but yet real money making opportunity in this pair was seen recently in 2006 and 2007 only where it showed signs of strong upward trend. 2008, 2009 and 2010 were pretty much down or side ways markets YET we have seen more people jump into currencies and other mediums (thanks to low entry barriers and effective marketing campaigns) than any other in the history.

What I do is look for strong UPWARD trending markets only. Right now you could say Gold, Oil, Copper, Coffee etc are in strong trends so if you really want to play around with leverage then position trade them NOT day trade. The computers are programmed to wipe out small traders only daily basis in these markets.

I personally trade only all time high stocks and ride the trend till it dies. It REALLY does give you results. The money you can make in two to six months keeping one correct position is better than going in and out 30 times per day.

If you like a small burger shop in your area you would go there every day and tell others too. Very soon all people in town would go there and this is where the main money would flow. Invest or position trade money is flowing in and not going out.

Having said that even in bull markets (strong trending bull markets) there are only two to three times a year where real money is made by the best in market. Once you are in a winning trade do not get out until the money starts flowing out and it can be confirmed in the form a trend change on DAILY or weekly charts. Its better to give your money to charity or directly to broker if you want to trade anything below daily.

The markets require liquidity from suckers that day trade so that a small number of traders and large institutions can make big money. Be part of that group and not the other way around.

Peace

Plenty wrong with this but let's just argue this point:

Instead of fighting both support and resistance, why not select instruments that offer only support but no resistance OR only resistance but no support and then ride the trend until the money flow gets disinterested? This way you do not have to fight daily battles with thousands of others like you who are trying to play a game of tug and war.

So you've just disagreed with the basic laws of supply and demand.
I guess your point is trade with the trend but you can do that day trading as well.

Also, FWIW day trading can be as simple as 1 trade per day or 1 trade per week, it doesn;t have to be scalping for 1 or 2 ticks every 10mins.

 

[Depth Trade]

You are still 8-10 years out from being consistently profitable.
You have 2 years in and not profitable, double or triple that time and you have say 4 years. Fundamentals need to be learned, add on another 4 years. Being able to put that all together add 2 more years and you're at a total of 12 years to call yourself a consistently profitable trader that can handle any situation.