Trader Q&A's

FTSE Beater

Experienced member
1,518 5
Well, it's great to have a thread that talks about money management :)

Hi Razorgirl
what have your experiences of increasing position size been, if you have done it?
I tried it about a month ago and the market took my money and never looked back (I did go in heavy). :(, I'm now fading in and out of positions, and using money management a lot better.

Any tips on increasing position size would be great. :)
 

hjk

Junior member
44 0
Any tips on increasing position size ?
Don't until you've doubled/tripled your capital! :) -Well actually I'm quite serious.
 

sifts2win

Member
59 0
Hjk,
you have a point. Maybe I am not comfortable with being so unsociable which I have mastered these last few years. The ego bit is harder. I know its not glamorous and exciting but possibly at some level I think its cool and different, which is very sad. I'm off to see a shrink right now. Can I send u the bill ?
 

hjk

Junior member
44 0
Sifts2win -
Most people are by nature fairly gregarious, they like to be in a 'group' and feel much more comfortable there. That as you know is no use for a trader, in fact it is downright dangerous. But does being a good trader HAVE to mean being 'alone'? I do try my best to separate my trading life from my social life, but then agian 'you are what you do' even more so as a trader than any other 'job'.

Save your (my?) money at the shrink's. Just tell everyone how boring, crap, lonely it is to be a trader - a bit of sincere self-deprecation is guaranteed to deflate the ego! :)
 

hjk

Junior member
44 0
Sifts2win -
Also, if you can't recreate that scenario of 'not thinking about the money' doesn't that automatically mean you are trading outside your comfort zone? Either too big position size or trading with 'scared' money?
 

razorgirl

Junior member
23 0
FTSEB, suppose having doubled your money plus a bit extra, without increasing your position size, you were to take your original stake of 1K out of your account and put it in a savings account. This gives you a back-up pot. Your position size is now based on what is left in your account (less any drawings of course) and grows with it - you should be able to be more confident as you have now protected your original capital so you can start again if it all goes horribly wrong. Then as your account size increases take more out and add it to your back up pot, so your position size goes up proportionately with your trading account but not proportionately with your total capital.

I suppose this is another way of saying "don''t till you've tripled your capital" and also "don't risk money you cannot afford to lose".
 

sifts2win

Member
59 0
Hjk,
The large ego is well and truly hidden. I was once a master of self deprecation and to be fair I have found out a lot about myself through trading. I've more bottle than I imagined and have realised there is nothing worth worrying about in your entire life. Its all just a game !
I used to trade too big and had some serious sleepless nights in the early days. But you're right again, I can just about trade now when my hands have stopped shaking enough to press the button. Seriously I am trading with 'scared' money so the cushion of the job will hopefully free me from that. Also trading for small amounts prevents me from taking profits as my 'ego' says "its not worth it, leave it and hope for the big move tomorrow!!!" which often results in a break even trade or a loss. I reckon tradings more about your pysche than all the rest put together.
 

hjk

Junior member
44 0
S2W-
Yep, In 'Van Tharp's' book he argues that trading is 90% psychology and the other 10% is just following a list of simple rules.
I agree with him.
 

Helenqu

Established member
841 3
Hi all,

Interesting thread.

A lot the answers rely on your personal circumstances and the things (including other income) that you have in your life besides trading.

For me I have two young children, I want to work from home and I'm basically happy just to compound my capital, I don't need to draw income from it. So my trading is essentially a way of growing capital, hopefully at a higher rate than the building society.

None of which means I don't have a passion for trading. I do, I love it. But it's a job to me, I have never seen it as a way of making lots of money. That's one of the reasons why my capital management rules can be so tight (no more than 1% on each trade). Slow and steady is my motto. Boring and dull :)
 

Henry

Active member
177 2
Re: 90% psychology 10% rules, I agree. But this suggests that if you removed the human element and had a machine trade your rules, you'd be more succesful (and possible more sociable!). But thats another story, and something I'm looking at outside of trading hours.

Re: Chatrooms / BBs. I can see where he's coming from with rule 14, and you're absolutely right about "follow your own light", but if it wasnt for rooms and boards like T2W, I would never have learnt 1/10th of what I have, and continue to learn. There's also a certain comfort from being able to see other people having a bad day when you are, but that's back to the whole psychology thing :)

H.
 

sifts2win

Member
59 0
I love you guys,
How can this be a bad thing. Everyone is helping everyone else and being so honest !
My respect to Sharky- It all works doesn't it.
Keep talking folks. You can never stop learning and every thing helps so well done and thanks.
 

Morris

Well-known member
304 2
Agree with Helen - slow & steady, dull but we can't all be 'Masters of the Universe' [not this week anyway.]
 

ChartMan

Legendary member
5,580 46
Yes, this has turned into a great thread! I think we will all learn a lot more from the analysis of psychology than from looking at a plot of RSI ....... Cash pot, risk %'s ultimate aims and all those things are different for every one. This is where the group get together thing will benefit everyone. You just have to find what you are comfortable with above all else. FTSE's happy with a couple of hundred quid a week ( for now) , Helen is happy seeing her Captal increase, I'm happy just learning..... I just trade when I feel in the mood.
 

ChartMan

Legendary member
5,580 46
I watched an interesting program tonight with Professor Winston in it. It was about psychology of winning and losing. Nothing to do with trading, as such, although there was a bit at the end about Leeson. Basically there were a couple of relative points.
1. The fear of losing, and actually losing, wipes out any thoughts/possibility of being able to win........
2. If you think your opponent ( the market) is stronger than you, you will play your stakes down.
How true!.
So what can we do?
Eradicate the fear of losing. This must equate to rigid stop loss implementation such that it becomes just an unemotional exit. The cardinal sin here is to sit it out in the hope that it will come good. Well, maybe it will once in a while , but in the meantime you just get in deeper and deeper. The deeper you get in , the harder is is to get out. Make that an exponential relationship for good measure! Losing has to become nothing more that a wasted trade. If it makes you sweat, your stop is too long.
Your opponent is strong, very strong. There is no doubt about that. You have to believe in yourself that you can,over time be better than your opponent. Treat the situation as not a once only match, but a series of games. Like golf( I hate golf). You may lose a few holes, but at the end of the day, you have 18 to play. If you can win just 1 more than your opponent, you will win the match. Simplistic , I know, but that's how you should look at it.Get it into your mind that at the end of the day, you will lose some. You will win some too. Just make sure that the ones you lose are insignificant and the ones you win are good. I'm convinced that with any reasonable stategy,so long as you kill the losers swiftly and without fear, the winners will look after themselves.
Then and only then, can you set about optimising your winners, knowing no fear.
Forget about whether RSI should be 14 or 17, or MACD should be whatever, concentrate on your money management.
As for position size, the fear is equal for all. If you are betting 0.1% or whatever, it matters not if you pot is 1k or 100K. If 1k is all you have, then losing a substantial part of it brings about the same amount of misery as the guy who loses a substantial part of his 100K...... Better take the suggestion made earlier- put away some of your pot and avoid wipeout. There's no point in bragging about having 100K to trade with if you lose 25k of it. The guy who has 1k can be wiped out 25 times before he loses the same amount of money.... Hopefully , by that time, he would have learnt his lesson, become a better trader and be on his way to some serious capital growth.
These are just my thoughts and won't apply to everyone, We're all different and can handle the psychology in different ways.What does apply to everyone is the importance of loss management.
 

Henry

Active member
177 2
ChartMan, on the subject of psychology in trading your golf comment reminded me of an interview I read with a top trader somewhere who said that the best books on the subject of psychology in trading were books on sports psychology.

She suggested that trading was much like playing a tennis match in that just like a top player will put everything into the point they are playing regardless of whether they are winning or losing the match, a trader must concentrate only on the trade in hand. One must forget about the last trade, whether it was a winner or a loser means nothing, the next trade is everything, and as soon as it's done, it too means nothing.


H.
 
 
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