Broken all the rules - Help!


As I am sure quite a few members can relate to never being able to pick the right direction in trading. I for one seem to be very good at it. Although every now and then I do get it right and I seem to be on top for a while.

Then of course I go and do something very stupid and it all falls apart, like it is doing for me now. I use SB's for betting the Dow so don't like to use actual stops until I am in profit (my first mistake) because of the amount of times I have had them touched only to reverse on them.

To cut a long story short I bet the Dow up on Monday (After most of it's rise) and then sat there and watched it come all the way down. I had my mental stop and as I saw it turn and I new I should get out, but just sat there frozen like a rabbit in head lights, my finger poised on the mouse. This is something I seem to do often.

To top this off the bet is too large and I can only survive down to around 8050 before my account is wiped out. My account is with D4F, so the futures is already makin it worse today. My question to the experienced traders out there is, what should I do now? Close out and take the loss and live to play another day or stay in because I may see a reversal to the upside (soon).

Secondly, do you have any tips for overcoming such stupid behaviour. As I write this it's making me feel even more stupid by the scentence.

I have now lost all confidence in my TA to really understand if I will make the right decision. I feel that if I get out now it will undoubtly rise back up but if I don't it will be sure go down.

If I survive this, I'm going to take a break for quite a while (or mayby I should just do it now).

Thanks for any help you can offer in advance
You will not see the market while you're looking at a losing position. I haven't a clue what the Dow will do either.
You must place your stop and leave it alone. You answered your own question. Your position is too big.
Start afresh. Lesson learned, hopefully.
Hi there

I agree with Oatman, you must get out asap. I sympathise totally as I used to do this sort of thing too. Believe me you will be relieved when you close this position, even if it is for a gut wrenching loss. I dabbled with the DJ for a short time, but found it much too volatile, and like you I used to have mental stops which I was very good at ignoring. I always place physical stops now - stops me dithering!

Good luck

I agree with Oatman close your position and for the following reason more than any other:

In trading you HAVE to learn to accept taking a loss.

The more times you take the loss the more you will get used to it but in future take your loss where you first set it and always make sure it is small.

Trading is a losers game, (up to 95% lose), and those that learn to lose the best are the most successful. All large losses start as small losses and you just have to make sure that when you take a loss it is always small.

The consequence of not closing the trade is as follows:

1) The trade may well go into profit but psychologically you will then think that if you hold onto a losing position it will turn around. But I can assure you it will just delay the inevitable fact that you will lose very big at some point in the future.

2) The trade loses even more money and you take a massive loss.

So close your trade and take the loss however painful it may be.

Got to agree with oatman. Cut it.

Survival and capital protection are now your prime aim. The current market is news driven. A hiccup in Iraq and the Dow will fall significantly. Good news and it will spike. It is a market for small and cautious stakes.

Most, if not all, of us have been where you are now. It is an awful feeling. If the market continues down the feeling gets worse.

Stake sizing is one of the most important aspects of spreadbetting. Over staking will wipe out an account in hours. Believe me, I have done it.

Your other option, if you still hold your original view, is to reduce the trade to a comfortable level. Take the loss on the larger part of the trade and run the balance witha proper stop.

Not taking the stop is problem when the stake size is too high. You should reduce the stake size to the point where you are very comfortable with the level of loss that a triggered stop will cause. Right now you are probably in a vicious circle with this trade. You can't take the stop because the loss is too high. The loss is too high because the stake is too high.

Adjust the stake size to suit the market and the stop.

Good luck whatever you do with it.
Why do we all have to burn before we learn? This is not a criticism Lard42 - I used to get caught like this myself despite all the warnings from more experienced traders at the time.

I have to agree with the others - get out now. The S&P and dow futures are in a downtrend this morning - and you will be relieved when you are out - albeit for a large loss. You cannot make rational trading decisions when you are under this sort of stress.

When planning a trade, the first thought should be "how much might I lose?" rather than "how much might I make?"

When going long, where is the nearest support? How strong is that support? How often has it held before? And how close is it? If jumping on a trend, how far away is the trend? Always beware entering a long position a long way from support or a trend (which is after all only a sloping line of support). Is there resistance close above? How strong? Any potential areas of resistance - like round hundreds for the Dow (8100, 8200 etc) and even more important, round thousands (8000 etc) which may provide important psychological s/r.

If you identify these you will be able to see how much the index must move against you before your analysis is proven wrong. So try to go long just above support or a trend, and with resistance a long way above. This way you can set your stops tight because you will know very quickly if support fails - and you are proven wrong, thus minimising losses. Always try to enter a position at a point where it becomes immediately obvious if you are wrong. The aim is to excercise disciplined money management to ensure your survival - not prove yourself right or wrong. The market is always right - it is just a case of whether you agree with it. But if you back your disagreement with your money, the market will always win because it doesn't care.

I have 2 stops. The first is a "catastrophe stop" that I place in the system at the same time as I open the trade, which is set at a level where I am demonstrably wrong, and where I will be taken out of the market automatically at a level I can stand even even if my pc crashes, or if a digger goes thru the phone line - cutting off both my pc link and my phone - and taking into account that we live in a mobile phone "black hole" and I have to walk 400 yds up the road to guarantee a signal.

The second stop is the one that I plan to exit at, and will be much closer than the "catastrophe stop".

I learned the hard way not to place my catastrophe stop and my mental stop too close to each other, having twice closed my position manually at my mental stop only to have the catastrophe stop simultaneously triggered putting me back in again without me noticing! So, having closed your position and cancelled your stop ALWAYS check that the position you have is the one you think you have.

If there is not a logical level to place your stop based on the above criteria nearby, then ask yourself whether you want to take the trade. After all, there will always be another which does meet these requirements. If you still want to take the trade - how much are you prepared to lose in both cash terms and %age of account terms? I start to wince noticably if I stand to lose more than 1% of my account in any single trade. In this case, in the absence of closer logical s/r, set your stop at a percentage of the capital at risk AND ENTER IT INTO THE SYSTEM!!!! It is much easier to make these decisions when you are not under pressure than when you are burning, and the decision is likely to be a better one.

If you are trading a volatile instrument, then stops need to be set wider than for a low volatility play. Therefore trade smaller with a volatile instrument than with a non volatile one.

Once in profit, never let let it turn into a loss. If there is a straightline move giving you a windfall profit, the professionals will probably take their profits pushing the price back again. If you must hang on in there, try selling 50% (as advised elsewhere on T2W by Mr Charts) and close the rest if half the remaining profit is taken back. A useful technique for a straightline move is to draw a fibonacci fan between the bottom and top of the move, and exit if the price crosses the 1st line (61.8%). You may be surprised at how often it provides support/resistence for the next leg of the trend. I've attached a chart of the ftse future at the position it's in as I write which demonstrates the point for a short position.




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Thanks all for your advice, I knew all along what I should do. It's going to be real hard to push that button, but you are all right and I really do need to do it and just take the loss.

The annoying thing is that I knew I should not have entered the trade in the first place. I had done my TA the previous day and decided then that if a rise occured on Monday it would be to risky to enter at at the level I did, but I did it anyway. I guess I just need to learn to live my mistakes and get out quicker.

This is a tough game, that's why there are so many losers. I am determined not to be one of them in the long run. I just have to remind myself that I need to do this otherwise I may not trade another day.
Position size tooo big = over come by FEAR. I know the Yanks say go big or go home- mostly true except in trading. Go Big and GO BUST!
I have posted elsewhere on this subject recently....
I agree 100% with Roger. It's almost exactly how I'd like to trade all of the time. Always have a stop ready before you enter.
I'm a trader before I'm a technical analysist. If it's any consolation, I screwed up badly on Friday. Long Ftse and I think a rocket went off or some chemicals were "found", who knows?
Anyway, bad habits returned in the heat of the moment, tried to chase the loss and...........well, surprise, it just got worse.
If there was no emotion, there'd be no markets. Just wish it'd been someone else's!
Monday morning, back to basics.
Have a look at these 20 Golden Rules. I printed them off and have a look now and again just to remind myself. Most of them I can identify with. You will recognise many of them.
Observe No.6

Good luck,
I have to agree with all of the above. Last year I shorted the Dow at 7200. I had no stop in place as I was convinced that even if it rose it would sink quickly, after all (to me) it's obviously overvalued.

As you know it started to rise and just kept going. I came to my senses after a couple of days as it passed 7800 and got out.

Along with everyone else, I say cut it - NOW!

Certainly on the intraday 30 min ES chart (big picture) there's a head and shoulders formation - we're at the top of the right shoulder, and that usually means there's as much down still to come as we've already had. Of course, the h&s could fail. I know which way I'm trading today :D

In this game you always need to live to trade another day.
Lard - you just managed to describe the things we've all said we wouldn't do ... and then did.
I got back into Futures trading recently, deposited money, got online system.. made profit the first 3 days .. got over confident and then lost about 9% of my account on a Friday as I refused to admit I was wrong and kept averaging in. Hopefully.. you'll kick yourself as much as i did that weekend and although the halo drops every now and then ;) it was probably some of the best money i've 'spent' recently as it taught me some well needed humility... Get back on, unless you feel a particular affinity with DJ try something a little calmer - even Eurostox (if you don't like the stops on SB's try futures) trade small and best of luck... you are not alone as i think you can see!!
Its a lot easier to lose money trading than to make it. How many times have we all gone long at the high of the day or short at the low?

Here's a thought, why not just do the opposite trade. So if you want to buy then sell instead and vice versa. Surely that way 95% of daytraders would win and only 5% would lose. Why wouldn't that work? Because entry is irrelevant it's where we exit that matters.

Don't worry about today mate, because whatever you do it's bound to be wrong.
The good news is that you live to fight again, and every day is a fresh start in this game. Start small, build slowly, there's no rush.

Good luck,
Thanks all for your support. Should have warned everyone though that the markets revolve around me and that as soon as I got out it would automatically go back up again.

Hopefully some of you made a good return on todays rollercoaster ride. Feeling just a tad too beaten up to play today. Think I will take a break for a while, let my nerves settle back down and start again small. :(

I'll just keep up to date with all the on t2w and maybe do some paper trading and then hopefully learn something.
That wouldn't work either since someone is not going to be wrong 95% of the time without being an awesomely bad trader.
They will keep on being bad until they start learning.
"Because entry is irrelevant it's where we exit that matters."
I'm sorry, but that is completely wrong. It's a trader myth which doesn't work in the long run.
Why wouldn't it work, you ask. Because volatility is knocking you out of your positions because your position management is wrong and is unrelated to the instrument you are trading, its volatility on the day or the leading indicators.
Someone else in Weybridge, huh? ;-)

The US has been very easy to trade this afternoon so far, especially Nasdaq stocks. Check out the futures if you have a feed, if not the nasdaq 100 cash or the composite. Five minute bar trading has been a dream.
I've never read a question before to do with what should I do now, and get all the same answers from traders. There is always some difference of views.

I obviously also agree with everything above.

At this point you have to ask yourself. Will I stay disciplined in the future, and if your not sure or you know you won't be - then you really shouldn't be trading. You might as well write a cheque to the market and save yourself the trouble of trading :(

I know that may sounds harsh, but its true.
Thanks Mr Charts for your reply, it was exactly what I wanted someone to say. I was trying to highlight the fact that at some point we've all gone through periods where we think that if we'd done the exact opposite trades we would have made a bundle not lost it. Of course that wouldn't be the case for the reasons you say.

Ok so entry isn't completely irrelevant but in my opinion it is the least relevant part of the equation behind stops and position sizing. A random entry system with controlled stops could still make money, a random exit system surely couldn't!

Perhaps my logic is the reason I'm not in St Georges Hill (yet!)

Hi Tim,
"A random entry system with controlled stops could still make money".
Well, it 'could'........., but again it wouldn't in the long run as it sounds plausible in theory, but the hit rate would be so very low, the drawdown would steadily mount up and the self confidence would sink to levels you wouldn't trade at.
Get the entries better, the exits better, the money, risk and position management right, a decent understanding of the market, a reasonable amount of knowledge of TA, tape reading and a tiny bit of funnymentals and success will eventually come if the mind set is ok. Fail on any one of those and you are doomed.
That's why so many start and eventually fail. It isn't as easy as starting traders like to think, but if someone like me can do it, anyone can.
Looks as if we might not get a decent sunset here in Weybridge after all - it normally shines through our cherry blossom trees beautifully at this time of year.
No, I don't live on the Hill ;-))