My trouble with controlling risk...

RiskTrouble said:
When the character does change, I don’t want to be in that position any longer. I want to be able to pull the trigger as soon as I know it’s wrong. I think part of the problem is taking money out the equation in thinking about winners/losers.

Well going back to how you want to be . The control of yourself to flow with the market.
With your dialouge, I think it worth setting up a trigger phrase which on external expression you simply comply with.

Suggest as this is how you see it as something like " The character has changed."

as soon as you hear yourself get to Changed thats your click point to exit. Just focus on what the markets doing, your giving your commentary of the market, focus on the market, forget yourself, we perhaps have to become detached from obtaining our trade by trade expectations of each trade.

Thats why its a interesting situation that we have to work through. Whats the cause?, are we looking to resolve that , or do we (or is it better ) change the situation by addressing the symptomatic behaviour, without finding cause.

I think we can do our own psycho analysis if we want to address the cause and look deeper into the reasons for "why we do not do what we want to do" .

But i can also see that treating the behaviour, can also bring about change without doing the cause route.

What is best for the individual to address cause or effect ?. Subjective I guess but also interesting.

Do we want to understand why we do or dont do, or do we just want results of correct action for ourself? Thats the individuals choice too I expect.

If as you say your system is robust, you know your trading knowledge is good enough for you to be able to compete then I'd suggest the conditioning to change your behaviour treating the symptom with external vocal expression ....

" The character has changed." click. you exit on changed, no later. dont wait for a tic or 2 for it to come your way just ,change. I think for this to work you have to always go when you read and voaclly express this change in the market.

Set yourself a plan, give this at least a fair wack 20 ,30 trades that you will act on your command to act phrase. Lets see how you and the results go with that. Record all your trades, and that you acted on " The character has changed." click.

The market has changed all you/we have to do is change with it.

" The character has changed." click

" The character has changed." click

" The character has changed." click
 
grantx said:
Crap Buddist,

Excellent suggestions re talking out loud. Printed.

Grant.

Cheers, makes sense, in fact thinking on it, using the sentence - "The character has "Ch"anged."

the click point I think feel would be best executed when you hear yourself say the " Ch "of the word change. By the end of the whole word change, you should have a deal ticket confirmation back. And youve closed out and thats job done.

I also think that maybe waiting for the whole of the word change, waiting til the end of it may leave temptation to pause for another moment, thats why i see going on hearing "ch" of the word change ,to me anyway, implies we are flowing, actioning, and not being static or pausing for further confirmations.

I can personally relate this to my own experience when executing a Bungee jump 300 foot above the river thames some years back, I was watching the screamers go down, and also noticed the instruction command they give to jumpers, which was.

"I'll say 1,2,3 Bungee. when you hear the word Bungee, you jump. "

O.k. now a few people I noticed waitied for the whole sentence, and paused. Hesitated, refused.

To cut to the end, I went on BUN of the word bungee, a majestic swan dive which made Jonny weismuller look like a amatoor..... :) my mate, he also went over the edge, the thing with him though, looking at the video was that he looked like a suicide jumper falling off the edge of a car park roof, lol, not graceful at all.

So you want to be clear out of the Bungee cage, by the end of word bungee and clear out of a trade by the end of the word change.
 
What I do to maintain my discipline is to write down what I call my "step by step" method of trading : I have written down a simple checklist for buying and selling and I have to tick, even mentally, all my steps for closing or opening a trade. When I do that I have no regrets no matter what happens after. That trade has been a success as far as I am concerned. And I go for 100% success rate (as far as my method is concerned :cheesy: )
 
Crap Buddhist,

So now you're suggesting if we make a bad trade we take a jump from a great height into the Thames? This is this aversion therapy.

Grant.
 
grantx said:
Crap Buddhist,

So now you're suggesting if we make a bad trade we take a jump from a great height into the Thames? This is this aversion therapy.

Grant.
:LOL: no just noticed how some jumpers, were still hanging about after the word bungee , had been said.

They paused, and didnt go, perhaps some people do need the extra cohersion , or momemtum of enthusiasm of the command phrase, when jumping to actually get them to jump over the edge.

And i think that its more probable they'd go if the instructor said, "o.k. as soon as you hear the first sound of Bungee, then give it your best dive over the edge. "

But perhaps, the instructor is not allowed to say that ? or encourage further, I mean you do sign a death disclaimer. And ,er maybe thats why a few pause and dont go. Fear of death, departing from themsleves

Trading ,Fear of Loss, departing from their money.
 
Mr Charts. Very good last post. But regarding stops.

Most of the time on a short time frame ie 2 mins, I didn't have the chance to place a stop sometimes, or I was quite happy to trade without a stop in place. After a while you do get to know when you have it wrong and the price is turning against you.

Though to try and help out with this thread in regards sitting like a rabbit caught in headlights on the wrong side of a trade, I do think that a firm stop in place is the answer to start with

There has been a lot said of a traders' inability to 'pull the trtiger' to get into a trade. But the ability to 'pull the trigger' to get out of a trade is a lot greater.

Hence a realistic hard stop is the answer. This also covers the problem of not being able to get through to your broker for whatever reason. Mass market move, power cuts etc.

The last one 'blew up' one of my accounts in 2 days because I couldn't get through. Can you credit it? 2 power cuts in two days!

Trading from abroad sometimes does have drawbacks.

CYOF: If you do not have anything relevent to post then do not bother to post please. This thread will be of importance to a lot of members: Do not import schoolyard mentality from other threads over to this one. There have been a lot of very helpful answers to this problem for the thread starter. Just because you do not or cannot see someones point of view does not give you the right to start a slanging match. How about keeping things relevent to the problem?
If you can't then don't post. It is that simple.
 
options said:
.

.........................CYOF: If you do not have anything relevent to post then do not bother to post please. This thread will be of importance to a lot of members: Do not import schoolyard mentality from other threads over to this one. There have been a lot of very helpful answers to this problem for the thread starter. Just because you do not or cannot see someones point of view does not give you the right to start a slanging match. How about keeping things relevent to the problem?
If you can't then don't post. It is that simple...................

i've deleted the post and banned him for ignoring warnings about such insults
 
Risk Trouble.

Your set up sounds just like me. I trade three or four markets (Dow, FTSE, Oil, Gold) taking a few ticks several times a day.

My win rate can sometimes go to a week of winners or more.

Exactly the same as you I have a problem closing the one loser that wipes out all the good work, and what's more you know how it's going to end before it even get's too bad.

In 2002 I had two losing days in twelve months and only just made a profit as a result from not getting out when I felt it was wrong and then averaging that losing trade, again not exiting when I knew I should.

I am going to try some of the ideas posted on here and should you have any luck with any method please post it on here.

I can relate to your frustration when you know you can pick enough winners to make a living if only you can control the losers.

In some ways I often wish I was that awful I never picked a winner and quit the game ending the frustration.

Best of luck and let us know how you get on.

I'm going to try to get a positive phrase to say out loud to help me exit a loser and feel good about it.

I reckon the key it turning your mind around so as that you feel proud of being right for getting out rather tahn being wrong for getting in in the first place. I too 'have' to be right sometimes but it's costing me too much so something has to change!

Stephen McCreedy
 
Those that go for larger time frames. Don't you think that the stop has to be further away to compensate for this, therefore, increasing the loss when it happens? I've just closed one out, this morning, as the market is going up, against my wishes! I've had this since Monday and my loss was 20 points. I don't like them as large as that, which induces me use smaller timeframes.

It seems to me that the "correct thinking" with regards to where one puts his stop does not work well with EOD trades. Perhaps, I should expect my trade to start moving in my favour almost as soon has it is opened and, if it doesn't, close on a ten point loss (for example), instead of waiting for the previous high to be taken out, which can be a long way away if trading on a breakout.

Also, a strictly numerical ten points and out seems to be a more ruthless way for treating indecision.

Split
 
“Cut your losers and run your winners” may well be an often quoted axiom, but I think there’s a bit more to overall profitability than that. On the basis that prices never move in straight lines, but zig-zag and are fractal, then the discipline you impose on cutting losses will have a direct bearing on your winners. For example, if you cut at 5% loss you may have a win rate of (say) 70%. If you then decide to be stricter and cut at 2% loss then your win rate will reduce, because you are taking a 2% loss on some positions that may well have touched a 4.99% loss but then subsequently bounced back into profit.

Just my twopenneth worth.
 
Profitaker said:
“Cut your losers and run your winners” may well be an often quoted axiom, but I think there’s a bit more to overall profitability than that. On the basis that prices never move in straight lines, but zig-zag and are fractal, then the discipline you impose on cutting losses will have a direct bearing on your winners. For example, if you cut at 5% loss you may have a win rate of (say) 70%. If you then decide to be stricter and cut at 2% loss then your win rate will reduce, because you are taking a 2% loss on some positions that may well have touched a 4.99% loss but then subsequently bounced back into profit.

Just my twopenneth worth.

I'll look into that over the weekend. Maybe my reluctance to accept too big a loss is making me trigger happy. Thanks for the idea.

Split
 
It's been a couple of weeks, and things are better. I wish I could say that I have had unqualified success since my last post, but unfortunately I did invite the market to cause me some pain a couple of times. I'm still having trouble pulling the trigger to close out trades that I know are doomed; however, I am parking stops to avoid runaway losses and that has worked out well.

Something I found particularly helpful was to remind myself that I cannot control my risk if I do not define my risk. This simple concept certainly isn't news to me, but it has an amazing calming effect if I say it out loud to myself (thanks again, Buddist). My system gives me volatility-based stops on a particular direction in the market, but I realized that I was ignoring them because at some level I was refusing to define/accept my risk. That made it impossible to control. By consciously accepting the risk when I put on each trade, I am enjoying trading much more. I'm not sitting there wondering when my next giant loser is going to happen.

I think this will be a continual process of accepting that a small loss doesn't ruin my day (or even a couple of small losses). I believe the stronger that acceptance grows, the easier I will find it to close out trades I don't like anymore (i.e., without waiting for them to hit my stop). It's a two step process of 1) being aware that the character of the market has changed such that the probability of success is no longer in my favor (this part I've got); and 2) accepting that the probability of success has diminished (or disappeared) and acting immediately. As with defining risk, I'm understanding that I must consciously accept these ideas, not simply be aware of them.

My last trade of the day today was a 12-point loss in oil on a long, where the market blinked down a little more than usual and hit the price of my stop trigger exactly, and then headed right up to my 25-point profit target. However, I'm enjoying the feeling of doing the right thing (i.e., taking the loss I planned to take), even if not having a stop would have worked out to be more profitable. There are plenty of afternoons when oil just rockets off in an unexpected direction and doesn't look back. At the end of the day I made money, and I did it without putting myself at unnecessary risk.

Many thanks to everyone for their continuing advice. Have a great weekend.


Regards,
 
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Risktrouble:

Very glad to read that last post. Well done sir. This is the road to recovery, one trade (step) at a time, just the same as any habit formed illness. Nice and easy does it.

The trade that hit your stop and shot off to your projected target only enforces one thing: That you read the market correctly before placing the trade.

The fact that it hit your stop and then took off has happened to us all, (often). So how to deal with that?

Well, you can do nothing if it is a once in a while occurance. If it begins to happen more often, then either your stops are where everyones stops are; and are prone to being stop run by larger traders (including) mm's who want to buy at a better price and shake out the weak hands at the same time thereby getting the lions share (again). Or you can use a larger stop and avoid this but suffer the chance of biger losses if the market turns at that point and almost takes us back to square one. So maybe that isn't the best approach.

So you either use an intial tighter stop, that will cut losses quicker of course but may give you less income or you are getting into the market too early and giving money away.

I wouldn't suggest using a larger stop, but on some trades I would sugest waiting a little bit longer.

How to tell which ones to wait longer for?

Not easy, but I believe it becomes subjective. It's a feeling that cannot really be taught, but it can be induced and enabled by lengthy repetition of constant viewing and (mental) trading of your chosen market. And it 'belongs' only to you.

Sorry it is not a very scientific explanation, but it does work and at first read through it may come across as mubo jumbo or a Socco type answer, but in truth it is not. It is just a greater understanding of your chosen instrument that you trade.

But it all starts with the fixed stop and the discipline that comes with it. I said on another thread somewhere today that trading is boring. This 'knowing' your instrument is what I meant.

This may go someway to addressing Splitlinks question a few posts back about longer timeframe trading.

Imv and how I trade for the longer timeframe, which I do prefer nowadays. ( I still have a (scalping) account to satisfy the need for a quick fix). ALL my trades start off as short time frame trade with a tight stop either mental or hard in the market stop. The mental stops are where I can sometimes fall down. After all this time it can still happen and cost me a few more pips/points then I would like to give away. Not the caught in the headlights run the rabbit over type, but a few points none the less. I prefer to get out of the market on a few pips the wrong way, and can always get back in at some point. I think where a lot of traders go wrong is trying to get back in at their original point.

I am currently giving a young chap some signals and last week we kicked off on the gb/usd at a low of 1.9402 Now I wanted to go long but I ended up not liking the trade and we got out at a scratch trade. The next trade was a long at 1.9275 but I had to go out so we put in a 25 stop.
This was hit. If I had been in front of the comp it would not have been that much of a loss. The next trade was at 1.9225 with a stop 25 under that. That trade is still running. The intial stop was moved to b/e +10 and stayed there for a while. So a free trade no matter what happens from there. Move to lock in a 95 profit, and now I don't care what the market does. Then lock in a 194 profit and after 2 days of falls I may move to lock in another 100 thereby giving a sure 294 profit. But curently the stop is at 1.9394 over the last couple of days the market touched 1.9700 or as close as makes no difference. So at the end of this week there was 500 pips on the table. But my point being that it took me a week to get that over from a ten minute timeframe to a daily timeframe (And it is still not properly installed in that) but comfortable in a hourly frame). One of my accounts has taken the weeks work of the table. Another one is holding for the longer term and a thousand + pips are possible.

With eod trading your stop should be under one bar away at least. And this can mean a very large stop in place before it (hopefully) gets into profit. Get it wrong a few times and you have no account left. I have had trades go great with a 20/25 pip stop and trades go horribly wrong with 150 pip stops. I think the key here is locking in a profit when you can (even if it means sitting on a -20/25 pip loss for a few hours/days before it is safe to at least lock in a b/e stop.

I hope that this has given you a different insight. Eod trading is very doable but may; (not always though), require larger stops
 
I know this is going to be rambling and disjointed but bear with me. Some thoughts of mine to help me take losses more easily. I am slowly turning the corner but as Friday showed I'm not there yet!

“When the facts change, I change my mind" John Maynard Keynes.

Another quote I like taken from 'Speculation as a fine art' a must read book of mine runs something like this.

"A man who doesn't change his mind has no mind to change".

These are key thoughts I'm now using when taking a loss.

It reinforces that changing your mind and accepting you WERE wrong is acceptable and even a great trait to have.

There is a quote somewhere in Reminiscences of a stock operator that runs something like.

"When I am losing money and wrong there is only one to be get back to being right and that is get out"

What a great idea. Like feeling right? Well close out and bask in your discipline for a bit.

also

"markets are never wrong, opinions are".

Sorry I couldn't spare the time to look up exact quotes but you get the jist.

There is also a story in 'Pit Bull' where Martin Schwartz is trading from an office, he is bullish so people around him copy him. He goes down to the floor has a mooch around then comes back, the market is falling.

The guys who had taken his lead are desperate now and ask him how he is so calm. He tells them when he went to the floor things didn't feel right so he reversed his trade.

All this little thoughts prove to me you have to be prepared to be wrong in order to suceed in this game.

You could make millions but failing to accept you are wrong once could wipe all that out and more.

I think most people who've traded for a while know that feeling of 'knowing things aren't right'. The key is acting on it.

For me I say out loud, "the facts have CHanged so I'll CHange my mind"

The first CH opens the order ticket the second CH sends the order to market.

On Friday I took a short trade on Jun Ftse from 6327 to 6363 now that's big loss when you only make 10 pips a day. Imagine my frustration on sitting there losing money for a whole day when simply reversing the trade would have made the initial loss back in no time and set me up for a good weekend as it grinded higher.

I'm getting there and I know this is standing between me and more profit and in turn the lifestyle I want to create.

Good luck everyone, fear your losses getting worse!

Stephen McCreedy
 
Controlling risk can be acheived with automation. I remember i had similar problem before I had full automation .. Now a days 99% of my intra day trading is done automated and the result has been rather rewarding .

This is today's trades executed fully by the vwap engine . ( Excluding commission charges)
 

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Grey that looks great!

Automation is what I am working towards.

Who do you excecute through?

I use IB at the mo and they seem to be all geared up for automation.

first I need a system, then I need a computer boff to help me out!

Are all your systems US stocks and intraday?

Stephen
 
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