Just want to vent and hear some advice

[dannyegg4575]

I've started trading at the beginning of this year. I followed all the rules all the recommendations from the books i've read. I was in the zone... so to speak.
At first, it was tough, I started out with $20000 in my account. That was wiped out.
Then, I borrowed $50000 to trade in my account. With that $50000, I was in a better position. I turned it into $320000 in a matter of months... Everything was going so well. I used the buy and hold mentality and never really put on any stops...
Only to see months of hard work, wiped out in two days.
I thought I could do it again by borrowing another $50000. Only to see that $50000 go down to $5000 as of today...
I don't know what to say really... This is a real tough game. I hope this go as a lesson for those of you who want to trade in this market. I don't know what to do now... My confidence is completely lost... Any suggestion would be appreciated...

I know it was stupid but what else can I do?

sigh...

 

[Trader333]

Two things:

1) Never borrow money to trade (in other words only trade with money you can afford to lose)

2) With this level of loss you cannot have had any concept of risk and money management and so I suggest that you learn about it before ever trading again.


Paul

 

[Rhody Trader]

For the sake of others that will read this thread, your first mistake was starting off with WAY too much money. No rookie has any business starting off that big. You're bound to lose when you get going until you get it sorted out. No need to put up that kind of money.

After that I'll agree with Paul. Never borrow to trade. And you were clearly trading much, much too big. To run an account up 6 fold in a matter of months implies playing positions way too large for your account. That's why you got wiped out quick.

To get your confidence back the only thing you can really do is start small and slow, and focus on making good trades with proper risk management.

 

[shadowninja]

What they said.

Please tell me that money was a play account and not real money... $115k loss in a year, otherwise? I can't imagine what it must feel like losing $50k in a couple of days.

And always use stops!

 

[Paul71]

Two things:

1) Never borrow money to trade (in other words only trade with money you can afford to lose)

2) With this level of loss you cannot have had any concept of risk and money management and so I suggest that you learn about it before ever trading again.


Paul

Hi Paul.

This is just my personal opinion, but i don't agree with 1). I'm not saying it's for everyone, and what you have said is correct in that a person should not put the roof over their heads in jepordy. But borrowed money is the way to go, if not the only way to go, just as long as when it comes to paying it back (if you lose it) you have the angles covered. I can't afford to lose my own money, Paul, i can afford to lose somebody elses.

I respect your stance or view mate, i'm not arguing, i thought i'd just give a different perspective.

Sincerely.

 

[Rhody Trader]

I can't afford to lose my own money, Paul, i can afford to lose somebody elses.

After posting my own thoughts about not trading borrowed, I sort of rethought the absolute nature of it. There are times when trading on borrowed funds can be justified. It is most certainly not the case when you are a newbie with no record of success.

Here's the question, though. Is it not true that when you lose someone else's money - borrowed money - it's effectively the same as losing your own, assuming you have to pay it back? Your net worth drops by that amount either way.

If you have to pay interest it's even worse.

 

[Trader333]

I take your points and it is more a rule of thumb as I know of some who have lost everything by borrowing and then losing.


Paul

 

[Paul71]

After posting my own thoughts about not trading borrowed, I sort of rethought the absolute nature of it. There are times when trading on borrowed funds can be justified. It is most certainly not the case when you are a newbie with no record of success.

Here's the question, though. Is it not true that when you lose someone else's money - borrowed money - it's effectively the same as losing your own, assuming you have to pay it back? Your net worth drops by that amount either way.

If you have to pay interest it's even worse.

I know what you're saying Rhody, i'm not saying newbies should go out and max up on credit. As for 'real' net worth, i don't really think it's at risk, as long as you go about it in a certain way. It's probably not wise to go into details, it's all a tad sinnister for some peoples pure thoughts, to say the least.

Are the markets pure as the driven snow?

Regards.

 

[Paul71]

I take your points and it is more a rule of thumb as I know of some who have lost everything by borrowing and then losing.


Paul

Hi Paul.

Most definately, i know what you're saying and i agree.

 

[shadowninja]

I know it was stupid but what else can I do?

I didn't answer this question. I'd say: don't trade. Take a break from it and work out how you lost it all, how you will avoid it and what you've learnt from it.

 

[ampro]

I started out with $20000 in my account. That was wiped out.

I borrowed $50000 to trade in my account. I used the buy and hold mentality and never really put on any stops Only to see months of hard work, wiped out in two days.

I thought I could do it again by borrowing another $50000. Only to see that $50000 go down to $5000 as of today...

You quite clearly belong in a lunatic asylum.

 

[dannyegg4575]

I know a lot of you guys are thinking that I am crazy. Perhaps I am. I only wrote here to share with you my experience as a trader and how I had sabotage my own account by overtrading. I did not ask for sympathy or anything. Just thought you guys might be able to shed some light if you had experience.

 

[ampro]

I only wrote here to share with you my experience as a trader and how I had sabotage my own account by overtrading.

Just thought you guys might be able to shed some light if you had experience.

Shed light on what though?

You jumped into shark infested waters carrying absolutely no protection whatsoever.

You say you were "in the zone"....you weren't in the zone, believe me. What you were in was cloud cuckoo land.

I guess you skipped the book/chapters relating to risk when you were leafing thru all your manuals? If you did, you missed the best (& most important) bits!

You didn't mention the overtrading bit in your initial post, but it's as clear as day you have no appreciation or respect for risk - that is the key missile which sunk your boat.

 

[BSD]

Think one problem is that people tend to over-estimate what they can do in the short term, while severely under-estimating what they can achieve over time...

Best advice I ever got was from, amongst a few others,

Amazon.com: Reminiscences of a Stock Operator (A Marketplace Book): Books: Edwin Lefèvre,

Amazon.com: Market Wizards: Interviews with Top Traders: Books: Jack D. Schwager, (and the second one)

Amazon.com: Pit Bull: Lessons from Wall Street's Champion Day Trader: Books: Martin Schwartz,

Amazon.com: The Logical Trader: Books: Mark B. Fisher,

Amazon.com: Trader Vic--Methods of a Wall Street Master: Books: Victor Sperandeo,T. Sullivan Brown

Amazon.com: Trading Risk: Enhanced Profitability through Risk Control: Books: Kenneth L. Grant

and

Amazon.com: Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude: Books: Mark Douglas

The success relevant insights for me at least essentially consisted of the following:

Anything can happen at any time in the markets (think, all it takes is one massive order that can be anything, a hedge, a position being covered, somebody entering the market with a view diametrically opposed to yours, but that will all have the same effect of throwing all of your clever analysis overboard and triggering your stop loss)...

You don't have to know what happens next to make money (reacting to what happens is entirely sufficient)...

Losing is part and parcel of trading...

You can be wrong 70% of the time, but if on average your winners are three times the size of your losers you will still be outperforming most others in the markets over time...

Research in hedge funds (from the above "Trading Risk") shows that across all trading styles and portfolio managers, the overwhelming majority of profits will always come from a handful of trades, the old 20/80 principle again, which is corroborated by the fact that both the Turtles, with a very low hit rate but far larger winners than losers, had that phenomenon as well as "Pit Bull" Marty Schwartz, who had a very high hit rate, but smaller winners than losers...

Focus on protecting what you have so that you can participate in the market the next day...

Before you put on a trade, know where your stop loss will be !

The distance from your entry to your stop loss will translate into how much you are willing to lose per trade...

1 - 2% loss per trade should probably not be exceeded...

Even if you decide to focus on a high win rate strategy through having winners that on average are smaller than your losers, you will still face eventual outlier events where you have substantial strings of losing trades...

If you're betting 5 or even 10% per trade you'll be spending all of your time either digging very deep holes even deeper, or trying to surface from the depths, but what you won't be doing is enjoying much time on new peaks.

Good luck !

 

[dannyegg4575]

Thanks guys. I know about the risk management. I guess what clouded my thinking is that my stops tend to be hit very often in the beginning and that causes me to be out of the market fairly quite often.
With regards to not respecting risk management. "i don't think anyone would want to lose money." --Mark Douglas. And it's true. The reason I didn't put on stops is because in the beginning, I did and that is the reason my $20000 was wiped out so easily.
Maybe my stops were too tight, maybe. But I did use the 2% rule and it failed me miserably. I even had the thought of thinking Market Makers knowing where all stops are, so they try to kick you out before moving forward... Hence, the shadows of your candles on each chart. Just a theory... so, I went in "naked" and that somehow made me a fortune. Well, only for a short time being... Hindsight is always 20/20. I should've placed it regardless while I was ahead. That is the truth.
And anything DOES and WILL happen. Just a lesson for the newbies.

 

[shadowninja]

Thing about stops and the 1% rule: if you have £100 in your account, that means you can only risk £1 per trade. This means that you can have a stop at 1 point and risk £1/pt or have a stop 100 points away and risk £0.01/pt, and any combination in between. So you have to figure out what the stop should be for that security and then risk a corresponding amount per point such that it does not risk more than £1. The problem comes when you have to spend a specific amount eg £5/pt or buy a lot for £100. In this example, it means you don't have enough to trade with so should not trade.

 

[FXSCALPER2]

My stops have progressively got very very tight. I place fairly wide stops initially but I almost always get out long before they can be hit. If my positions do not show me a profit soon after I put them on, I am usually wrong about the trade. Unfortunately, this skill comes so slowly and you can lose a lot in the mean time. That is the reason I would advise people to understand that they would almost certainly lose at the beginning and should be extra-cautious with the risk they take.

Once you get to a stage where you can trade, it makes no difference where the money you trade comes from. In fact, I think a good trader should look to borrow money with low interest.

By the way, I think 'Trade with 'what you can afford to lose' is a very dangerous advice.

 

[Rhody Trader]

By the way, I think 'Trade with 'what you can afford to lose' is a very dangerous advice.

You could be right on that, but I think it's worth elaborating.

 

[shadowninja]

My stops have progressively got very very tight. I place fairly wide stops initially but I almost always get out long before they can be hit. If my positions do not show me a profit soon after I put them on, I am usually wrong about the trade. Unfortunately, this skill comes so slowly and you can lose a lot in the mean time.

Absolutely. Why stay in the trade if you know you're wrong and all the indicators are screaming that you are wrong in the trade? I used to let it go to the stoploss point but now I have the mechanical stop purely in case I get carried away and the old greed/fear psychological battle takes over, but once the indicators say I'm wrong, I admit defeat, cut my losses and get out. (I've lost enough money by thinking that it might change direction.)

Conversely, in a profitable trade, I now take money when it's on the proverbial table. I've been in many an overnight position and seen it climb up 50 pips just before I go to bed (I think, "I'll hold because it'll be even higher in the morning."), only to fall 70 by the same time the next day. Nowadays, if I see a sudden spike that presents a lot of profit to me, I'll tighten stops massively and take the profit if it falls a few pips.

I sometimes do the opposite in my play account and I notice that riskier trades are slowly dwindling my play account's funds.

 

[TWI]

I know of two people who did similar things to you. One was not only with his own cash but also that of a number of his "good friends"..after 2 years of sending out false statements showing 30% per year returns he was found hanging in his trading room with a note explaining that he had lost it all.
The other one lived what appeared to be a very successful life with the nice house, cars, champagne and labels only to one day confess he was actually 1mln in debt that his wife had left him he was losing his house all the cars were on finance and he was an alcoholic. He is now a total wreck and unlikely to ever recover.

Some people are just not cut out for this game and if you do not have an extremely good self discipline then you have lost before you even start. All we ever hear about in the rags are the success stories. I know many professionals who made it by taking big positions and getting it right but who could just as easilly have got it wrong and never be heard about.

Sorry to hear your story. I hope you find a way to dig yourself out of the hole you are in. You are correct, this is a hard and unforgiving business and you have found that out in the hardest way.