How do you manage to win and stay profitable?

[petershine]

Hi,

I make a deposit, start trading and get $50 to $100 or so and then it's loss after loss from there.

How do you keep a logical mind and the patience to carefully decide when it's time to quit?

Please share your experience on how do you manage to win and stay profitable.

Thanks

Peter

 

[tomorton]

Everybody gets a run of losers from time to time, no matter how good your long-term win rate.

I try to stay focused on method and discipline. This game is 80% attitude, but only 10% knowledge and 10% technique. I give myself as much credit for money not risked and for strict accordance with my own method rules as £ in the bank per week because my attitude is under my sole control. As long as you've a sound method proven by backtesting and practice, which has some sensitivity to market sentiment, keep trading through the rough patches.

 

[petershine]

Thanks for the great input.

 

[BSD]

"My historic win/loss ratio is around 37% winners to 63% losers."

http://peterlbrandt.com/my-thoroughly-enjoyable-interview-with-charles-kirk/

Peter L Brandt is one of the best long term traders around, he started out with contemporaries like Michale Marcus, Ed Seykota, Bruce Kovner etc at the then Commodity Corp that was later bought out by Goldman Sachs.

Winning percentages are pretty meaningless.

 

[BSD]

"William Eckhardt:

The Win/Loss Ratio

“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. …

What really matters is the long-run distributions of outcomes from your trading techniques, systems, and procedures. But, psychologically, what seems of paramount importance is whether the positions that you have right now are going to work. Current positions seem to be crucial beyond any statistical justification. It’s quite tempting to bend your rules to make your current trades work, assuming that the favorability of your long-term statistics will take care of future profitability. Two of the cardinal sins of trading - giving losses too much rope and taking profits prematurely - are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
Market Wizards

Having said that, it is obviously VERY important that people trade in a way they feel comfortable with, so if they want a high hit rate through larger TP's than SL's, than that is just fine.

Becoming net profitable at all is very much more important than total gains.

Finally, not to forget what are probably the two single most important factors one needs to fully understand in trading if one wants to make it, let alone make it big:

A: Mark Douglas excellent and very common-"sensical" observation that anything can happen anytime at all in markets overthrowing your clever analysis, all it takes is one big order going against you.

B: Kenneth Grant, in "Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and Steve Cohens SAC Capital, that:

ACROSS ALL TRADING STYLES, TIME FRAMES AND TRADERS, ONE RULE HOLDS TRUE:

10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !

 

[neil]

"William Eckhardt:

The Win/Loss Ratio

“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. …

What really matters is the long-run distributions of outcomes from your trading techniques, systems, and procedures. But, psychologically, what seems of paramount importance is whether the positions that you have right now are going to work. Current positions seem to be crucial beyond any statistical justification. It’s quite tempting to bend your rules to make your current trades work, assuming that the favorability of your long-term statistics will take care of future profitability. Two of the cardinal sins of trading - giving losses too much rope and taking profits prematurely - are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
Market Wizards

Having said that, it is obviously VERY important that people trade in a way they feel comfortable with, so if they want a high hit rate through larger TP's than SL's, than that is just fine.

Becoming net profitable at all is very much more important than total gains.

Finally, not to forget what are probably the two single most important factors one needs to fully understand in trading if one wants to make it, let alone make it big:

A: Mark Douglas excellent and very common-"sensical" observation that anything can happen anytime at all in markets overthrowing your clever analysis, all it takes is one big order going against you.

B: Kenneth Grant, in "Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and Steve Cohens SAC Capital, that:

ACROSS ALL TRADING STYLES, TIME FRAMES AND TRADERS, ONE RULE HOLDS TRUE:

10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !

The Pareto (or similar) principle seems to pop up in most endeavors, it seems.

 

[barjon]

............Having said that, it is obviously VERY important that people trade in a way they feel comfortable with, so if they want a high hit rate through larger TP's than SL's, than that is just fine..................

!

Aye, it's much easier to design your system around your own psychological quirks than it is to change yourself.

If you really can't stand and hate losing then it will be damn difficult to come to love them .

 

[barjon]

.............. As long as you've a sound method proven by backtesting and practice, which has some sensitivity to market sentiment, keep trading through the rough patches..............

Maybe depends on your method? If it's one that works well in trending phases then a few losers may indicate that you are not in (or beginning) a decent trend and it may be better to stand aside.

 

[tomorton]

Absolutely jon. A decent system should respond to prevailing market conditions: its possible for the tide to be coming in this morning while the sea level is dropping worldwide. And it would be an odd system that churned out 10 buys in the FTSE100 every week regardless of what ese the world was doing (though I have tried it...... ahem.....)

 

[BSD]

The Pareto (or similar) principle seems to pop up in most endeavors, it seems.

Really quite amazing if one thinks about it !!!

 

[BSD]

Aye, it's much easier to design your system around your own psychological quirks than it is to change yourself.

If you really can't stand and hate losing then it will be damn difficult to come to love them .

Haha very true words !!!

One thing I really needed to learn was that it's all between the ears, I had to get out of my own way before making it.

 

[petershine]

Another problem with most binary trader is that they tend to treat it as a gamble and not a trading platform.

 

[tomorton]

Another problem with most binary trader is that they tend to treat it as a gamble and not a trading platform.

This is true, and the very short analysis times and holding times in daytrading make it especially not like regular work and more like a video game. Video games typically demand very quick reaction times and although the whole game will be hard and long to finish, they keep giving you small rewards, every minute, to keep you playing. There is always a nice surprise just around the next corner.

This is very parallel to gambling on say a fruit machine and encourages a very unhealthy mental attitude.

Partly for that reason I would recommend no beginner starts daytrading - just stick with longer-term stuff, swing trades or trend-following. If you become really good at them, try daytrading using your profits not your capital. On the other hand, if you're really good at long-term trading, why daytrade at all?

 

[0007]

........

Partly for that reason I would recommend no beginner starts daytrading - just stick with longer-term stuff, swing trades or trend-following. If you become really good at them, try daytrading using your profits not your capital. On the other hand, if you're really good at long-term trading, why daytrade at all?

Longer timeframes give you so much more thinking time. Inexperienced traders have enough on their plate already without unnecessary added pressures of timing. As far as I can see, daytrading is somewhat akin to driving an F1 car. I find it much easier sitting in the back of my chauffeur-driven Roller studying the charts at my leisure with a gin & tonic in hand.


I like Tomorton's suggestion wrt long-term trading. If you want to make more, just trade more.

 

[Fugazsy]

"you need to lose before you win, if you do not want to lose you will never win." by Fug.

 

[tar]

The ultimate success is to swing trade but with a daytrading stop .

 

[Fugazsy]

The ultimate success is to swing trade but with a daytrading stop .

I share that view, and when your are right it will pay you the bills for when you are wrong and more......so you need to get it wrong to get it right.....capisci?

 

[0007]

The ultimate success is to swing trade but with a daytrading stop .

That's an interesting comment. Is that in effect saying: if the trade is not going the way you anticipated from the start then it's time to get out? I find it's a bad sign when the trade starts going the wrong way and the natural temptation is to hang on – but that's not the correct thing to do.

 

[Fugazsy]

That's an interesting comment. Is that in effect saying: if the trade is not going the way you anticipated from the start then it's time to get out? I find it's a bad sign when the trade starts going the wrong way and the natural temptation is to hang on – but that's not the correct thing to do.

if you hang on it means you have not grasp it yet, you want to win at all cost, you cannot, it only takes a trade to nullify your direction, you protective stop will indicate that you are wrong in your direction or timing and it is time to move on to another opportunity making yourself FULLY available.

 

[Fugazsy]

beside having a day trade stop does not mean you have to trade everyday, if prices are in the middle our chances are little to swing, the lady needs to show her legs first before you can ask what time they open.