Help psychological problem

[schoe]

I am a discretionary trader I only use price action and no indicators prefering to keep things simple. I just break even and am not making huge profits despite attending several courses and spending several years practicing trading. I am very good at cutting my losses and try not to form an opinion about a trade but trade with momentum and the trend. I trade the Dow and Forex. My main problem is that I always seem to miss out on the big moves by taking my profits far too early. I watch the pounds ticking up on the blotter with CMC then take them after 15/20 points only to see the instrument carry on another 100 points.This may be because I have seen previous profits disappear and I don't have a set system. How can I resolve this problem. Should I use a Macd or a moving average or some other indicator to assist me or is this a psychological problem because of past scars.?
Any comments gratefully received.

 

[donaldduke]

You need to have some of sort of system that will guide you
in seting up your entries, exits (losses and profits) and
your position sizing.

Then you need to back or forward test (with a small position size)
this system so that you are confident trading it.

When you have a system and you find that market continues
moving in your favour alot after you exit then you can think about
altering your system to increase your profit size to loss size ratio,
but you would only do this if you found that this was consistently
happening.

A good book about systems development is Trade your way to
financial freedom by Dr Van Tharp.

 

[jsd]

do you use sensible stake size relative to account?

how do you think about money?

what was your parents attitude with money when you grew up with them. How do you feel with that?

try and keep one eye on both market action and one on your profits ,not both eyes on your wad...

trailing stop?

pivots,s&R as profit objectives? price action at these levels?

interesting subject that most people experience with the cause dependent on your mind and its beliefs.

jd

 

[Trader333]

Sell half your position at the 15 to 20 points level, raise your stop to breakeven and allow the second half to run.


Paul

 

[UBend]

Oh dear Schoe, sounds like you haven't got a suitable exit strategy!

A recent seminar that I was at had a talk by Mr Charts which helped me tremendously. He started his talk by explaining about his exit strategy. I thought he had it A*se about T*t to start with , but when you think about it it makes perfect sense. When you enter a trade you must have a good idea of where you are going to exit. Some people use targets but Mr Charts uses a very simple system which I am sure he wouldn't mind if I pass on to you.

If you use 1 min charts he will exit at the first candle in opposite direction or 10 EMA goes flat.

If you use a 5 min chart his exits are :-
1) 2 candlesticks against position & loss of ground = close half position. Third consecutive candlestick against causing loss of ground = close the other half.
2)Bounce off clear support/resistance then close half position
3)Close all position on a spike against you
4)Close all position if 10 EMA goes flat

If you can let your winners run I'm sure you will see a good increase in your profits

UBend

 

[jsd]

ohh forgot to add read The disciplined trader-mark douglas, encourages you examine your belief systems which ultimately controls how you behave whatever system you pick its your mental environment which governs how successful you'll be.
and lets face it we get exposed to a lot of S**T in life, that does have an effect, depnding on emotional experiences connected to the exposure results in the deeper formation of your belief system. But you can turn it round, pick up the courage, look inwards at yourself

jd.

 

[BBB]

Paul beat me to it! Thats just what I was going to say. It's also what I do.

People will tell you that this is potentially leaving money on the table compared to exiting the whole position in one later on. Of course this is right, but it wont help you - as you will be back to square one.

If you follow Pauls wise advise, you will be banking consistent profits, your confidence will grow - and so will your account and position size. It wont happen overnight, but the best things come to those who wait!

 

[boy]

Ditto.

 

[jsd]

People will tell you that this is potentially leaving money on the table compared to exiting the whole position in one later on. Of course this is right, but it wont help you - as you will be back to square one.

If you follow Pauls wise advise, you will be banking consistent profits, your confidence will grow - and so will your account and position size. It wont happen overnight, but the best things come to those who wait!

hmmm i'd rather add than reduce with positive price action, what you have outlined above is a treatment for the symptom and not the cause, ie as above being a confidence neurosis.

I feel i have to point out that it might be acceptable for the 2 individuals above but not neccessarily acceptable, nor appropriate for human number 3 ,who may want to treat the cause and trade with confidence, to ultimately become free of fear of losses profits the whole sha bang.

jd.

 

[schoe]

Thanks everyone. Jsd you have lost me slightly if you keep adding to your winning positions how do you decide when to take the profits or cut the losses. Surely trading this way any winnings will eventually be cut out by a loss on another position.
UBend I have been on a one to one with Mr Charts and am aware of his exit strategy. I am not confident that exiting on two negative five minute bars is suitable for longer term positions and I can't always sit in front of the screen. I would like to leave some of my position on for most of the day if the trend is strong like the euro/usd today for example.

 

[rossored]

quote : "i'd rather add than reduce with positive price action, what you have outlined above is a treatment for the symptom and not the cause"


i'm sorry jsd but you are plain wrong on that one. Scaling out at 15-20 points is good trade/money management - banking profits. Scaling in at that point when you're trying to increase your confidence level is not the thing to do. That would strike me as being foolhardy - thats not to say that scaling in in itself is incorrect - just in this instance.

I agree on the "trade with confidence" bit : but if schoe adds to position 1, and it turns tail and he takes a loss, and then he does the same with position 2, 3, 4 etc.... thats hardly going to be conducive to his confidence.

 

[options]

Schoe.

..."is this a psychological problem because of past scars.?"


It is now.

The only way past this problem that I can see is to work to a plan and stick with it.

First off, how do you define your entry? get this wrong and half the battle is lost from the start. you say you follow momentum. do you just jump in when it starts moving and try to hold on? Or do you trade breaks of sup/res/trendlines tops/bottoms etc.
If you have a method of entry and it's working, then use that for your exit. (Reverse it.) This is where one single ma will work well. If price crosses that, exit.

Being good at cutting your losses is no good if you cut or have stops too close in the market. It sickens to then see the trade go in the direction you expected; more so if it shoots off.

"... My main problem is that I always seem to miss out on the big moves by taking my profits far too early. I watch the pounds ticking up on the blotter with CMC then take them after 15/20 points only to see the instrument carry on another 100 points.This may be because I have seen previous profits disappear and I don't have a set system."

Now weigh that up with the times you have seen the 15/20 points profit, then watched it reverse the other way again. Glad you were not in the trade. Or probably were in the trade and you didn't take the 20 points. Sick feeling that. You get 3 losing trades. Feel dejected. Watch the market for a while and the next 3 trades you would have done, go right. You enter on the next trade signal and get screwed again.

I'm glad you brought this up actually. Everyone has done this at some point. Time and time again. Me included.

Solutions then:

If you can get a 15/20point trade a day; bag it and walk away. Do not worry about what the market does after that. It is of no concern to you. you have done your job and made profit. do this everyday and you can build up a decent roll.

This is great if you are trading full sizes (2 x 10 lots) or at least £5 point with cmc. The same would apply to the advice given above of selling half at the 15/20 point profit, locking in a stop and trailing the rest to a subjective profit level. ie. Don't try to hold it until it hits the moon.

If you are trading at less then these levels then the natural temptation is to hold for the bigger profit. Indeed the only option is to hold for the longer ride. and the only way to do this is by trailing your stop and having that set at a proper distance away. Sometimes this will pay off. But what happens when a 'normal' stop of 30 points isn't enough? You have 50 points profit up. Ten minutes later it the other way by 80. This is where the plans go out the window and you must rely on intuition. That 30 point stop would have been no good. Much better to take as much profit as you can, before it hits your stop.

The better way though is to trade bigger size, shorter time period, smaller profit target. = More profit, less time in market. Job done. Go down the pub. But this is a lot more stressfull due to the larger possible losses. Very important to have a method that can give you 10 points consistently.

So key to everything is to have a defined entry/working the trade/exit plan and to stick to it. If this fails. 'May the force be with you.'

Thing is, you can't tell when the market is going to give you 100 points/pips. It doesn't do it everyday. The eur/usd of late has had some great runs and some painful sideways action in the same day. Best you can do is to be ready.

 

[TheBramble]

Schoe, so many good pieces of advice, any combination of which should help you.

What interests me is your comment that you're making 15/20 pts on trades, but just breaking even - how do you manage that?

My own advice consists of just 3 things (touched on already):-

1) Trailing Stop. Once your position is in profit, move the stop to entry and keep moving the stop in the direction of the trade (never reverse it!) until it reverses against you and brings you out.

There are a number of systems/methods for calculating size of stop and they depend upon your trading timescale. As you're trading Forex and the DOW I guess you're intraday and would suggest using the previous 5-min bar high/low as the simplest approach. But you would obviously want to play around with this to find an approach that suited your personal psychological risk levels.

2) Scale-out. When you hit your 'normal' 15/20pt profit - sell half your position. At least until you're more confident with your stop-loss setting from point (1) above.

3) Get some psychotherapy. JSD already made a very astute recommendation regarding consideration of your parents' attitude to money. We are all products of our social environment and I'm sure you'd be quite amazed just how what we 'learn' in our formative years gets 'translated' into adult decision-making processes and behaviours that are totally inappropriate.

Without any personal recommendation for the following, it may be of interest to you, most probably because you see this issue yourself as a psychological one - therefore, it is.

http://www.takethat.co.uk/acatalog/TTL_Net_Works__NLP_for_Traders_and_Investors_59.html

There is also a clinical psychotherapy practice which specialises in financial traders issues and ISTR they are based in Suffolk/Norfolk, but for the life of me can't remember their name and couldn't (on a quick search of the net) find details, but another t2w member may have that info.

HTH

 

[oatman]

If you can get a 15/20point trade a day; bag it and walk away. Do not worry about what the market does after that. It is of no concern to you. you have done your job and made profit. do this everyday and you can build up a decent roll.

This is the best advice.
Also good advice is to take 50% and run the rest with a trailing stop.
Build your £$£ and your confidence will grow. This is a confidence thing. Once your fund is above a certain level(only you will know when that is) you will ignore the money and trade the points.
You cannot trade if you're watching £$ signs.
Judging from your results, you already have a good method.
Your analysis is good, so believe in it.

 

[DESKPRO]

Funny my problem at the moment is I have entry and exits defined (using Capital Spreads new order) but when logon and even though my levels haven't been hit I start trading because I think I am going to miss out on some money making opportunities. Concluded that I am doing this for the excitement and trading is giving me a buzz. Reading Van Tharp "Financial Freedom via Online Trading" and one of the points that is made in it is that your trading pln should be really boring but I am finding this to be a problem. Also at the mo am too impatient to accept because the thought of taking say 6 losses on the run and waiting for the bigger profit run.

Out of interest how many of you sit and stay outside the market if your entry signal is not hit or like me do you try and trade because you think you will miss out?

I know this is a psychological problem I need to resolve if I am to be successful at trading.

 

[jsd]

Jsd you have lost me slightly if you keep adding to your winning positions how do you decide when to take the profits or cut the losses. Surely trading this way any winnings will eventually be cut out by a loss on another position.

I can't always sit in front of the screen. I would like to leave some of my position on for most of the day if the trend is strong like the euro/usd today for example.

Hmmm if i sit and do nothing and do not close out when the market changes ,i get an arse kicking, so i close, after all Two longs can make you very light finacially, but i do not fear seeing that the market changes. it does what it does, i do what i do.

deciding for me when to take profits all comes down to what the price is doing relative from the zone its just departed from and its likely destination based on price zones that were previously rejected, example 1 method, price bottom zone at support zone buy, price action at pivot ,positive acceptance add. look to exit on rejection of price,(whatever level that is, they are fluid) the market is displaying to everyone what its doing

spike on support buy, positive development yonder spike add

bottom zone buy, double bottom add, ditto tops.etc.

exits depends on what the price is doing, volatility, acceptance,rejection,consolidation etc and at what price levels this is happening.

i'll look at tick,5 minute and 25 minute bars,daily awareness of ranges.

5/25 minute setup, tick trigger and 25 minute noise filter

but how i read the action of is course subjective (as is every single persons UNIQUE BELIEF SYSTEM.) its discretionary depending on the action itself so i dont always bang away adding for the sake of it, but its one thing to be greedy ,quite another to ignore an open wallet in public. just because 15/20 points is in the bag how is that relative to what the price is doing? the answer is that on some days by LUCK those 15/20 points MAYBE the top ,well done, but very likely 15/20 POINTS will have BUGGER ALL RELATIONSHIP relative to PRICE ACTION

the feeling one gets with "Take off half and punt" is one of partial satisfaction and comfort. But we are not here to nurse our feelings,yet to make money. Get on your comfy chair and have your brow stroked if you have to fulfill those needs.

the point i mean with reducing position, is that if you look at the action and are in tune with it, I add.
I Picture various scenario's of the days price action ahead, how is that daily bar forming, wheres it been relative to yesterday, whats it doing, whats the action at those levels.

as for your most of the day issue, i couldn,t position for most of the day if not watching, thats the point, prices change, you need to execute your decisions, maybe focus on the back end only, master that.

keeping asking ,but find out for yourself.

jd.

 

[schoe]

A big thanks for the replies. I am going to increase my stakes and take half at 15points then leave the rest to run and use a trailing stop. My stop will be 15 points too so hopefully by leaving the half to run this will increase the odds in my favour and winners should be bigger than losses . Simple can't believe I wasn't doing it before. Hopefully this will solve the problem and build my confidence and account size !

 

[Buk]

Schoe
slowly slowly catch a monkey!!........

Deskpro
ALL the profitable/successful traders you encounter on this (& other) boards will only ever enter a position when ALL their criteria is met....the markets are extremely unforgiving to those who randomely tickle the 'angry animal'.....if it means waiting an hour or a week, then so be it. Let the market (your entry signal) tell you when to play....and let it also tell you when to pack your kit up & head off home!....chasing positions will not only make you dizzy, it'll kill your pocket...this business is difficult enough as it is when the signals actually give you the green light, let alone chasing after it!!....... ....treat your given instrument like a bus, if ya miss the first one, wait patiently for another.

 

[options]

Deskpro.

..."I have entry and exits defined (using Capital Spreads new order)"

Can you clarify this. If, as I think you are using the parameters of the software to place exit stops and accept their settings, then I would rethink this. I don't know how CS have the gap set, but in most platforms it is too tight to the price. ie, standard setting of stop order on fxcm is 10 pips. 9 out of 10 times and unless you get the entry spot on of course, this will stop you out way too soon because of fluctuation. Stops are very subjective and personal. Imho.

..."and even though my levels haven't been hit I start trading because I think I am going to miss out on some money making opportunities. Concluded that I am doing this for the excitement and trading is giving me a buzz."

A classic statement. Not wanting to be left behind. Add to this 'Trading out of boredom' and 'Anticipating the chart move' and you have 3 key elements that can cause the premature demise of a trader at any level.

These simply have to be mastered, though small lapses are okay as long as you know you are guilty of the sin and recognise it early enough to get out.

Trading is, and should be boring. It's a job. It is your methodical approach to the market that in time does become boring because you do it over and over. That rush you get when you grab a good run becomes secondary to your primary task of taking money out of the market on a regular basis to support your lifestyle; whether it be £100 a week or £10,000 per week.
If anyone still gets excited by every trade they put on. Then they still have a long way to go.
Yes, it will always excite to grab a 100/150 point run. but these do not happen every day. If you want excitement, then scalp for a few points here and there. but that will become boring after a while also.

..."Out of interest how many of you sit and stay outside the market if your entry signal is not hit or like me do you try and trade because you think you will miss out?"

Hopefully, some of the above will have answered this. Everyone's answer to this question should be. 'I stay out of the market until my entry criteria is met.' To do so otherwise is akin to handing the market a revolver with a single bullet in it and asking the market to spin the chamber, then point the gun at your head and pull the trigger every time you trade like this. Ultimately, you are going to get your brains blown out. Even a Nasdaq scalper doing 250 trades a day will still only trade when his entry criteria is met. If it isn't met, he does not trade.

 

[al-motor]

Deskpro-


..."and even though my levels haven't been hit I start trading because I think I am going to miss out on some money making opportunities. Concluded that I am doing this for the excitement and trading is giving me a buzz."

That is basically a FEAR of missing out on a potential move ! I used to do it- but am getting better at discipling myself and this is becoming a rare event.........


Al