Blown account - HELP- with risk management and discipline

[dilesh23]

After blowing a spread betting account yesterday i was wondering if anyone had any words of wisdom to share on risk management and discipline inparticular from people who have had similar problems and what helped them to deal with it :smart:

Ive been doing some of these psychological test and found them rather useful:
Market Psychology Money and Investing Personality Tests

Also i made a list of what i thought i did well with my £200 to make it to a £1000 and what i did unwell to make £1000- 50p so far the pros are heavily outweighed by the cons

Pros

Traded a pin well taking the profits at the 00s resistance level £1 a tik, 20 tik stop and took a profit of about £500




Cons( wait for it theres alot of them )

Increased position at the wrong time thumbsdow on the image) when a new high was made rather then waiting for a pullback :s

Left losing postions on the Dow for far too long, including over the weekend and still didnt take it off when the rate decision came out

Allowed others to influence my decisions

Cut winning trades too early, had a short on ftse at 4440 and took it off to early then kept getting burnt trying to get back in on it

The risk % was far too high the plan was to start using the 5% risk rule when i reached £1000 but that didnt go very well

And i think some of the biggest mistakes were being too greedy, impatient and having too much of an appetite for risk and the lack of discipline.

Any pointers on developing these points would be greatly appreciated

 

[Hoggums]

First piece of advice - open a demo account and trade that for 6 months. Don't be greedy and trade your own money until you are consistently making money.

DONT TRY AND MAKE BACK THE MONEY YOU HAVE LOST. You won't. You have probably learned far more spending that £200 than you'd ever get on a trading course.

Try a strategy where you place a limit and a stop at the start of the trade and you don't touch the trade again once opened unless it's EOD. Make sure your limit is greater than the stop. If you are good at picking entries you will make a profit.

 

[Rhody Trader]

Ummm....You seem to have a pretty good idea of what you did wrong. The only thing I could offer as advice is "Don't do that." Really, as long as you focus on monitoring your trading and not repeating mistakes you should get to where you want to be.

 

[dilesh23]

ive been using demos for a good few months now being relatively profitable, but think the week spent on the beat the broker comp has had an adverse effect of making me going for a ridiculous amount of profit in one day i think it might be time to get back on them also the plan was too kind off start with a relatively small amount and try doubling my money a succesion of times £200-£400-£800-£1600 etc etc and i think ive now realised that its alot easier said then done
i was also trying to use the 4/1 rule of limit against stop but had the completly off idea of setting my limit on the dow at a new low of around 7423 and a stop around 8900 i think it might have made more sense using the rule for less greedy amounts

cheers for the gems of wisdom so far guys and im also getting a bit of hope from these quotes

"There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!"

"The loss of the money didn't bother me. Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost
money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it."

 

[fibonelli]

Hi Dilesh23,

Here's some suggestions:
Risk no more than 1% per trade/bet
Reward should be at least 2.5% per trade/bet
Stop Loss when you enter a trade/bet
Don't move your stop loss to a worse position
Stop Loss not in obvious place and sufficiently wide to cater for the insane volatilty
1hr or above timeframe
Consider if a good idea to *scale into a profitable position
Consider if a good idea to *pyramid into a profitable position
Don't enter trade competitions - they instill gambling habits.
........and, finally
Make sure you know where the key support and resistance price zones are before you enter a position.

*these words have specific meanings.

 

[dilesh23]

Don't move your stop loss to a worse position im gonna definetly inprint that one into my mind and will definetly have to learn more about scalling in and pyramiding before i attempt doing that again cheers some excellent points, infact i think im gonna cut and paste all of them on to my rules to follow and to be read before, during and after each trade page

 

[Hoggums]

Also - once your position is in profit by 20+ pips move your stoploss to break even. If it gets taken out you've lost nothing and you can always get back in again if you wish. It gives you a chance to re-evaluate your entry at virtually no cost.

 

[Masquerade]

Everyone knows real is nothing like demo as you have the psychological aspect. If your problem is discipline and the greed element then demo isn't going to help. Just get back to real trading - encounter more of those situations and you'll improve your discipline.

 

[Rhody Trader]

Also - once your position is in profit by 20+ pips move your stoploss to break even.

This advice is only good if 20+ pips is meaningful. For example, if you're a position trader looking to ride a long-term trend, 20 pips is noise. You'd likely kill your performance moving your stop up to break-even on that criteria.

 

[dilesh23]

i was going to include something which sounded like

Never let a profit run into a loss

Dont hold a position unless it is showing substantial profit in which case have a healthy limit order

 

[Masquerade]

i was going to include something which sounded like

Never let a profit run into a loss

Dont hold a position unless it is showing substantial profit in which case have a healthy limit order

Screw that, sometimes you've got to risk some to make a lot. Why limit your potential profits too - surely you're supposed to max them out?

 

[Rhody Trader]

Screw that, sometimes you've got to risk some to make a lot. Why limit your potential profits too - surely you're supposed to max them out?

If you attempt to maximize your return you'll take too much risk and and up blowing your account to smithereens. That's exactly what dilesh23 did in the first place.

 

[Masquerade]

If you attempt to maximize your return you'll take too much risk and and up blowing your account to smithereens. That's exactly what dilesh23 did in the first place.

If you read through his post again you'll see that was not the reason. A combination of poor money management, not running trades, not cutting losers and gambling with the unknowns led to the account being blown.

 

[FXSCALPER2]

Borrow money and trade big. You will die one day so...

 

[ceydababy]

Screw that, sometimes you've got to risk some to make a lot. Why limit your potential profits too - surely you're supposed to max them out?

Just my opinion. But if it comes to running winners or cutting losers it's a damn sight easier to get out lof losing trades. Once you master getting out of losers quickly, you can then concentrate on running the good ones. Trust me it's not as easy as it sounds, I'm still struggling with this part.

 

[dilesh23]

Borrow money and trade big. You will die one day so...

how much you gonna lend me? im willing to share a small % of the winners and none of the loses

 

[Masquerade]

Just my opinion. But if it comes to running winners or cutting losers it's a damn sight easier to get out lof losing trades. Once you master getting out of losers quickly, you can then concentrate on running the good ones. Trust me it's not as easy as it sounds, I'm still struggling with this part.

Use a stop and stick to it?

I find it the other way round - I find it harder to run positions and I can get easily spooked out of a position if it retraces 30 pips against me. For some of my trades walking away for the day would probably be the best thing, but it never works that way.

 

[ceydababy]

Use a stop and stick to it?

I find it the other way round - I find it harder to run positions and I can get easily spooked out of a position if it retraces 30 pips against me. For some of my trades walking away for the day would probably be the best thing, but it never works that way.

I'm agreeing with you mate. I get spooked by retracements against me. I normally set a at a level that I know the trades wrong if it gets hit. If the trade reverses against me I often get spooked out. One of the other guys I trade with holds through this and will come out of the same trade as me with 3 times the profit ! His name's Lee Shepherd

 

[Rhody Trader]

If you read through his post again you'll see that was not the reason. A combination of poor money management, not running trades, not cutting losers and gambling with the unknowns led to the account being blown.

I did read his post. If he'd been doing the first part (money management) right the rest of it would have caused some losses, but wouldn't have blown him up.

 

[FXSCALPER2]

how much you gonna lend me? im willing to share a small % of the winners and none of the loses

From a bank. If you lose it, tell them to bugger off. They get bailed out anyway.