Safe Gaurds - For when discipline breaks down.

[ffsear]

We talk a lot about risk management, the 2 % rule per trade, stop losses and so on. But what about a second set of rules for when all that goes out the window?

Now I consider myself a pretty good trader, I can make 5% a week, sometimes more, sometimes less. I can do this consistently.

So why am i not yet trading for a living? Discipline! That's why. Once every 3-4 months I'm going to have the moment of madness, when all rules go out the window and i become a gambler not a trader.

Last time this happened was October 2014. Trading my usual £5pp on the Dax with a 10 point stop. Winning some, losing some, waiting for that big move. Then all of a sudden the breakdown happens. I take a loss, I want it back. I trade where there's no signal. I lose again. I trade £10 instead of 5. I widen my stop. Before I know it I'm down £1000. Now I'm really pissed and trading at £25 and i'm practically all in.. Trading large with a massive stop and and before i know it my £7,500 account now reads £1,723. (obviously over this time I have made some withdrawals so the losses nd as big as they seem, but my base level that i try not to drop below and been desecrated) The whole episode took about 15 mins. In fact i was rather suprised I left the account with £1.7k still there.

I know all the rules, all the risks, yet still I had let 1 moment of madness almost wipe me out.

Problem is, I think this is always going to happen. The madness will always be there.

So knowing that, I began to wonder if I can makes some changes that will protect me when the moment of madness does come.

1) Don't keep my full balance in my trading account. Enough to cover the margin and a few losses. Then that's all I can lose. Why did I have enough funds in there that allowed me to trade up to £25?

2) Get someone to act as your trader and enter your traders. So I'm only looking at charts and call out out Buys and sells. I'm not entering the stops or position sizes.

3) Call broker and ask if you can be restricted to trade a certain trade size. (not sure if they do (or want) this)

4) Some kind of panic button that shuts your PC down for 24 hours?



Any other ideas. Remember this is not about risk management. I'm looking for safeguards that can help protect me/us when all the risk management fails.

 

[Fugazsy]

you are expecting the market to do something for you (you are good trader) and when it does not you have your "madness" justifying for you your way of trading, deep down you know you cannot make it, at any time you will react to the market the way you react to your environment to control it, the reality is you cannot control the market but you can flow with it. To flow you need to make some adjustments on yourself.

Yours is a great and honest post, I think you are near and you need to do that extra work which is also the more difficult bit.

 

[ffsear]

you are expecting the market to do something for you (you are good trader) and when it does not you have your "madness" justifying for you your way of trading, deep down you know you cannot make it, at any time you will react to the market the way you react to your environment to control it, the reality is you cannot control the market but you can flow with it. To flow you need to make some adjustments on yourself.

Yours is a great and honest post, I think you are near and you need to do that extra work which is also the more difficult bit.

Yea, I think another read of "Trading in the zone" is on the cards for me

 

[ffsear]

If you are consistently profitable, I'd question why you feel the need to occasionally revenge trade after a loss. I also think your solutions/changes listed above are wrong - you're looking for a solution outside yourself, when the problem is inside.

=

I know the problem is inside. But what i'm saying is. I know this is going to happen at some point, what can I do to mitigate these losses when it does happen.

e.g I had £7,500 in my account when it happened. But trading £5 on the Dax with a 10 point S/L (btw that is a hard stop, i usually manually close losses at around 3-6 pips)

But to trade £5pp with a 10 stop, all i actually need in my account is £150. Then perhaps a bit more, say £500 to cover a string of losses. The remaining money should have been in a segregated bank and not in my trading account where it will always be at risk.

Trading is about knowing and understanding your weaknesses right?

 

[Fugazsy]

Yea, I think another read of "Trading in the zone" is on the cards for me

 

[Fugazsy]

=

I know the problem is inside. But what i'm saying is. I know this is going to happen at some point, what can I do to mitigate these losses when it does happen.

e.g I had £7,500 in my account when it happened. But trading £5 on the Dax with a 10 point S/L (btw that is a hard stop, i usually manually close losses at around 3-6 pips)

But to trade £5pp with a 10 stop, all i actually need in my account is £150. Then perhaps a bit more, say £500 to cover a string of losses. The remaining money should have been in a segregated bank and not in my trading account where it will always be at risk.

when you acquire the proper mind set it will not happen because you will not react, actually you will thank you losses because you will learn from it, you will acquire a different perspective.

When we have a winning trade and we feel happy about it means we are not there yet, no emotions should come out as a consequence of a trade.

 

[itspossible]

ffsear-very good honest post-on 9/11 my account went from 10k to 13k in one day and in 7 days it was at 7k.wild trading.i then managed to claw back to 10 .from that day i vowed to trade very small.made about 1400 in the year and then lost 800 quid in 1 day.i then called it a day .sometimes you have to give up and avoid the stress.I am still looking at patterns etc but the markets are wild mate.Is it all worth it.Best of luck.sry for the negativity.

 

[ffsear]

OK I wasn't making myself clear... what I'm trying to say is "Why is it going to happen at some point?" This is a total break-down of discipline and your system. If you were a professional trader working for a firm you'd get fired for this. So why do you do it now?

Because i'm only human... I dunno. Emotion just takes over..

Some recent results... All in line with my rules, system etc, I can keep going like this... but at some point in the next 6 months will i do it again?

 

[Fugazsy]

Because i'm only human... I dunno. Emotion just takes over..

Some recent results... All in line with my rules, system etc, I can keep going like this... but at some point in the next 6 months will i do it again?

Humans lose in the market, great traders have decided not to be human when trading, because it only brings desperations....You can be human outside the the market if you wish....

Do not think you are the only one, most traders fail and fail because of this, you know what is all about but not quite, you need to deal with yourself to make that further step, in theory you know where the problem lays but knowing is not enough, now you need to go through it, start slowly..... set your rules to protect from yourself, (forget about your ability to analyse the market) do not worry on leaving money on the table...it is not about that, it is more deep than that, you just need a little taste of it....once you grasp it, you will laugh back.

 

[Fugazsy]

OK I wasn't making myself clear... what I'm trying to say is "Why is it going to happen at some point?" This is a total break-down of discipline and your system. If you were a professional trader working for a firm, your risk mgr would shut you down & you'd get fired for this. So why do you do it now?

I think this was a good post, I saw a lot of generosity in it.

Anyway done for the day.....I need a rest.. Ta

 

[tomorton]

Valuable, realism from this question ffsear.

Limiting account size is I think a good idea. It will limit position sizes and losses but should also prevent excessive numbers of parallel trades - that would be overtrading of a sort and inevitably the more open, the harder to manage.

Withdrawing profits on a set period also good.

Of course, as we're all tempted to revenge-trade, so we must also be tempted to trade against whatever our own risk-management rules might be, consciously or unconsciously - "I know if I make a loss on my third trade today I'm going to have to take 24 hours time-out, so I MUST win on this one".

As said above, it all comes from within, that's what makes this game so hard.

 

[Mr Fox]

We talk a lot about risk management, the 2 % rule per trade, stop losses and so on. But what about a second set of rules for when all that goes out the window?

Now I consider myself a pretty good trader, I can make 5% a week, sometimes more, sometimes less. I can do this consistently.

So why am i not yet trading for a living? Discipline! That's why. Once every 3-4 months I'm going to have the moment of madness, when all rules go out the window and i become a gambler not a trader.

Last time this happened was October 2014. Trading my usual £5pp on the Dax with a 10 point stop. Winning some, losing some, waiting for that big move. Then all of a sudden the breakdown happens. I take a loss, I want it back. I trade where there's no signal. I lose again. I trade £10 instead of 5. I widen my stop. Before I know it I'm down £1000. Now I'm really pissed and trading at £25 and i'm practically all in.. Trading large with a massive stop and and before i know it my £7,500 account now reads £1,723. (obviously over this time I have made some withdrawals so the losses nd as big as they seem, but my base level that i try not to drop below and been desecrated) The whole episode took about 15 mins. In fact i was rather suprised I left the account with £1.7k still there.

I know all the rules, all the risks, yet still I had let 1 moment of madness almost wipe me out.

Problem is, I think this is always going to happen. The madness will always be there.

So knowing that, I began to wonder if I can makes some changes that will protect me when the moment of madness does come.

1) Don't keep my full balance in my trading account. Enough to cover the margin and a few losses. Then that's all I can lose. Why did I have enough funds in there that allowed me to trade up to £25?

2) Get someone to act as your trader and enter your traders. So I'm only looking at charts and call out out Buys and sells. I'm not entering the stops or position sizes.

3) Call broker and ask if you can be restricted to trade a certain trade size. (not sure if they do (or want) this)

4) Some kind of panic button that shuts your PC down for 24 hours?



Any other ideas. Remember this is not about risk management. I'm looking for safeguards that can help protect me/us when all the risk management fails.

Good Afternoon Charlie(@ffsear),

I hope you are having a great day trading.

I must admit, I can really relate to what you have written, and still end up revenge trading when the red mist appears, to the point where my usual 5 pip SL gets moved until it becomes 10 pips, however circa 10 pips is my ultimate thresh hold, but on average my SL works out to be around 7 pips, so no real biggie. After 10 pips, live to fight another trade mentality kicks in, and that is what I do.

Trading is one of those endeavours that really does know how to lull you into a false sense of security/feeling of invincibility, to the point where you're ego comes into it, sound judgement leaves, and your determination to be right, ends up costing you a lot more.

The red mist of revenge trading will always be there, and I know my great, yet simple edge has bailed me out many times. I revenge trade, I'm usually quite tipsy most days(although everyone thinks I have a drink issue, I would disagree), and on every trade I'm at the races with my shouting, but underneath it all, my sound edge keeps me very profitable.

As for not keeping your full balance with the broker, I would suggest to only keep monies with the broker that you know would not have a detriment on you if it was gone in an instant, therefore there is no pressure on you, if it's lost or not.

The only solution I would give IMHO of course is keeping 5 post it notes on your computer labelled Mon-Fri , and another post it note saying "AVOID RED MIST/LIVE TO FIGHT ANOTHER DAY".

When you have a good Monday, move the latter post it note to Tuesday, on a good Tuesday, move it to Wednesday etc, etc. Have another post it note with some affirmations congratulating yourself when you've had a good day ie "I BEAT THE RED MIST TODAY" etc etc, and move that on each day you were profitable.

My work station is full of positive affirmations on post it notes in various colors, and although I'm looking at the screen, I know my peripheral vision/subconscious does read the notes, and re affirms to me what I should do.

This works for me, and there's no harm in trying it.

Best
John.

 

[sun11]

Hi have same problem too & replying in this thread is self therapeutic to me.
But i figure out a way to control this emotion & also developed a philosophy on this. I might be wrong, but this is the only way to stop myself from getting into "Mad Zone".

I limit myself on the number of the trade I will make per day. So if cross the limit & made day loss, then I consider its not my day.
If I constantly win all trades & market is giving me a good trend, then I go further than my trade limit but with a protection. My extra trades are like free trades.

I count loss & profit not weekly but monthly. Most of the prop trading firms follows that.
End of the month I see myself where i'm standing.

Lastly risking less is blissful.

 

[NVP]

Yea, I think another read of "Trading in the zone" is on the cards for me

hey dude

try to think of yourself as 2 traders - the strategist/brain and the trigger

detach them from one another ....2 separate entities

the strategist will send the objective signal when its ready to the Trigger

the trigger trades and manages the exit using agreed principles

the trigger is a machine - no ideas in it at all ........pull trigger to enter & exit

the brain is your system...........if you doubt the signal don't for god sake send it to the trigger ....only send sound signals

if you must trade them do it o a demo .........keeps it out of the fire

respect FF..........appreciate you sharing those demons we all have as traders

N

 

[NVP]

Because i'm only human... I dunno. Emotion just takes over..

Some recent results... All in line with my rules, system etc, I can keep going like this... but at some point in the next 6 months will i do it again?

who knows ?...........we are not robots......and humans are certainly not conditioned to be traders ............its very unnatural in so many ways

and addictive as well............in another life all of us could be sitting in AA or gamblers anonymous

my only other advice is to seek out a mentor or independent trusted person and have daily / weekly updates talking about how you have traded and the issues

you need to have something external as a marker to try to check that red mist when it comes ............and it comes to all of us sometimes

after all we are human ...........and actually that's a good thing

N

 

[NVP]

Hi have same problem too & replying in this thread is self therapeutic to me.
But i figure out a way to control this emotion & also developed a philosophy on this. I might be wrong, but this is the only way to stop myself from getting into "Mad Zone".

I limit myself on the number of the trade I will make per day. So if cross the limit & made day loss, then I consider its not my day.
If I constantly win all trades & market is giving me a good trend, then I go further than my trade limit but with a protection. My extra trades are like free trades.

I count loss & profit not weekly but monthly. Most of the prop trading firms follows that.
End of the month I see myself where i'm standing.

Lastly risking less is blissful.

good post

I see the point of the limits set - but remember the market has no boundaries so if it moves you have to fill your boots ................trading is about feast and famine.........markets don't understand the concept of averages ...it is us as traders that try to fetter those chains on it

I would try to set limits more within the rules of the system..........if you've messed up on x trades and losing hand over fist all the time that's not a problem solved by limits.....that needs a new system

N

 

[barjon]

..................... If you were a professional trader working for a firm, your risk mgr would shut you down ............... ?

ffsear

This bit of the DOW's post is very pertinent I think. You are really looking for a risk manager to shut you down when madness strikes.

Your own mindset stops you being your own risk manager - changing ones mindset is so much easier said than done - so you have little option but to look elsewhere. You may be able to impose position size restrictions with your broker, your account size is also a good limiter, or a trading buddy who can log you out of your account if they see you acting against your rules. Or anything you can dream up that gives you some sort of hurdle to jump before you can trade to give you pause for thought.

Personally, I found it impossible to change my mindset despite years of trying so I eventually stopped trying and tried to build my strategy around my strengths and weaknesses instead. The important first step in that is to fully recognise your weaknesses and more power to you for having done just that

 

[NVP]

hes a palace fan as well................so he needs to admit that one first

 

[sun11]

good post

I see the point of the limits set - but remember the market has no boundaries so if it moves you have to fill your boots ................trading is about feast and famine.........markets don't understand the concept of averages ...it is us as traders that try to fetter those chains on it

I would try to set limits more within the rules of the system..........if you've messed up on x trades and losing hand over fist all the time that's not a problem solved by limits.....that needs a new system

N

Thank you NVP!
Yes you are absolutely right about losing hand. In fact I have faced those & of course I changed system, but I changed my mind set more than the system...Cause sometimes i believe its the actual culprit.

Recently i found an article by Van Tharp, The Loss Trap. Its relevant with the OP's issue.
http://www.vantharp.com/Trader-Test/The-Loss-Trap.htm

 

[ffsear]

@DowJones[/USER] Because i'm only human... I dunno. Emotion just takes over..

Some recent results... All in line with my rules, system etc, I can keep going like this... but at some point in the next 6 months will i do it again?

I should have added that I was diagnosed with adult ADHD 5 years ago, which can makes me very impulsive. (Act now, think later). I have medication for it, but I don't like taking it. Maybe i should take the medication and see if it stops me from having these blowout moments @DowJones