I blew it again

Trading Discussion
1

Ive been trading for over a year now and in my first 8 months i must have blown my account(large accounts) atleast 3 times. All the mistakes that is humanly possible to make, i made them.

Last August i started to become more disciplined and was starting to break even. Just towards the end of the month, i got into a winning trade by pure luck. It was one of those chronic(1 sided fast moving) moves, i pyramided my way and stuck with it for almost 160 pips netting me a 40% gain. I was on top of the world. Sure by this time my account was very small and the gains were lightyears from making up for what ive lost since i started, but on record this was the first profitable month i had ever had. I saw the power of what letting your profits ride could do.

Come following months, i not only lost all my profits, but reduced my account to a third of it’s size. I was chasing the euro on it’s way up. On hindsight i find that my fundamentalist nature tends to get in the way. The Euro was rising from 1.18 all the way to 1.42. There was no fundamental reason why this should happen, because the debt problems had not disappeared over night and i kept shorting it and kept getting stopped out.

All this while, despite all my repeated mistakes, losses and margin calls, i always felt that i would figure this out one day. I started reflecting on what ive been doing all this while and came to a eureka moment. IF, since the time i started trading, i had done the exact opposite of what ive done all this while, i would have doubled my original account. I went through my transaction logs and saw that i was continually taking very small profits and taking very large losses to the point that a single loss could wipe out all my profits and account. I told myself, if i could just invert this one point, i should in theory make money.

I started using strict stoplosses of 1-2% of my account. I still did not have any system for entering my trades, one time it could be a moving average cross on any 5min, another it could be 3hr timeframe or even based on gutfeel. But i always used a stoploss of 1-2% and never added to my losing positions. If a trade went in my favour for over 20-30 pips, i did not take profit, instead i added on and moved both my stoplosses such that i would break even on net if it retraced. As you can imagine, 75% of my trades were losing trades, maybe 20% breakeven. But once in awhile i would get into a big move and coupled with pyramiding, i would make a huge profit.
In about 1 and half months, i doubled my account. I was still losing most of my trades but the drawdown was so small and managable that a single big move would cover that and give me a new equity high.

This week, the market was extremely choppy. It would drop 30-40 pips then rally 50 pips then drop 60 pips. Using my strat, i was getting slaughtered. For the past 2 days i suffered a total of 10% drawdown. But i was sticking to my rules. Today however, i shorted the euro. I knew that regardless of Portugals auction results, it would tank, ive seen the market do this before. If the auction was bad, it would tank, if it turned out good, it would still tank being a typical case of buy the rumour sell the fact. Coupled with the fact that i had been on a very very long losing streak(15+ losses) and being so sure, i started adding to my losing position. But i did not move my stop. Just when it looked like the price was starting to turn, it shot up again and I got stopped out in the European open. Next rule i broke was reentering with the cumulative size of my previous positions. Just before the auction results came out, i got stopped out again.

Then suddenly the euro started to tank. This made me absolutely mad, I was right all along but got stopped out just before the news release. It is perfectly all right to be stopped out when you are wrong and the price went against you, but being right, going through the agony for the entire day watching the price move against you plus the heavy position(cos of adding on) and then getting stopped out and watching the price go in your direction was too much for me. I shorted the largest position i could. For awhile i saw the price go my favour, but i wasnt even nearing my day’s starting balance after my losses earlier. Then the price started to retrace beyond what i would deem a retracement and i took what i could. It was a small profit but i was still down for the day. THen it started to tank again and i broke another rule, i got back into the trade with max position. Well it went against me and i did not close it early enough for fear of seeing it tank as soon as i closed it.

Now im sitting here with my account at 75% of it’s size it was couple of days back. Thoughts of giving up are starting to come on my mind. I havnt felt this low since my last margin call. At the rate i was losing this week, i felt that even if i did not break any of my rules, i would still slowly lose everything. I still don’t have a criteria for entering my trades and my strategy works only when i get in early enough(Anything less than 70-80 pips, i usually only break even). But pyschologically my strategy is not sustainable. Losing/breaking even for 95% of my trades during a long losing streak is something i have shown to be incapable of handling.

I know i probably wont quit, because having a day job is not for me in the long term, id prefer to start my own business to do what i like to do without worrying about it’s profitability. You are probably wondering why i even wrote this here, but i just needed to vent it out somewhere and maybe someone who has made it and is more experienced can tell me that what i went through is normal. Hell, even Livermore went broke several times in his life.

2

Every great trader has gone through this process one way or the other. It takes trial and error to find your true self in the market what I mean by that is to find an edge that’s suitable for you. For example, I found identifying waves and entering at the right moment with less risk possible helps me get through price consolidation phase while having a good idea which side it’s going to break out.

3

From reading your story, you have three glaring weaknesses.

#1 And probably your biggest issue:
Your positions are far to large.

#2 Overtrading.

#3 Stick to [U]ONE[/U] set of entry rules.

Downsize your lots, stop averaging in on losses until you learn an effective way to do so, and use only one static set of rules.
Having inconsistent criteria for entry, will lead to inconsistent results.

This really is a frustrating game.

But there IS hope. If I can figure it out, ANYBODY can figure it out;)

4

I concur with the above replies.

One good thing about yourself is that you’ve learned to admit when you are wrong. This is a key to learning, and to becoming a successful trader. You cannot blame anything or anyone else for your trading missteps. So accepting them as your own fault is the only way to fix them, I believe.

To add to Master Tang’s advice:
I agree your position size is too large. This has the biggest impact on your psychology. You don’t want to stop learning how to trade, so the easiest way to fix this stressful situation is to just reduce your position size. Cut it in half, in quarters, whatever you need – to the point where you don’t feel like puking when in a rough spot. It’s critical that you do this because you need to continue trading and investing the screen time to develop your strategy – above all else. Cutting your position size is guaranteed to reduce your stress level (ie the fear emotion).

Overtrading – yes, it’s happening if you are not following a set of trading rules. You should only enter/exit a position if it lines up with a strategy rule. Sounds like you need to work on those rules…

5

Average trader blow up his account and live FX forever. Great trader blow up his account, learn something from his mistakes and start again.

All thing are different before they are easy.

Look how baby trying to start walking. They try and fall down, they stand up and try again.

Good luck!

6

Been there done that, most of us have, most give up, but it’s all part of your learning.
At the end of the day - you will know yourself what you are doing wrong and what is bringing about the inconsitency - we can speculate - but if it is to be it will be up to you to work through it. It takes time and it is painful, often making the right decisions that bring about sustained success are harder and more difficult than the easy options that bring about failure
The easy option is a margin call and blowing your account, the more difficult option is making the right choices that bring success over a sustained period -and you probably know wat choices they are. Its a long long ultra marathon with sustained pressure over a long long time that has to be maintained in order to be successful…not a sprint which builds with excitement after a good win or when the account is large and relapses are no good!

7

Sorry to hear your story, seems like your on the rollercoaster… that can be pretty scary, and is’nt the best place to be when your trading.

Your trading does sound like a script many have read, but is it normal? … ummmm

I suppose comparing your story and many other similar stories that are out on the interwebs, I’d say it seems fairly common.

The common theme is often a badly organised game plan or no game plan. Try and think of trading as a performance activity, aim to gain more and more competence.

You’ve got to try and get things nailed down a bit otherwise you have no basis for comparison, what works?, what doesn’t work?.

I still don’t have a criteria for entering my trades and my strategy works only when i get in early enough(Anything less than 70-80 pips, i usually only break even)

8

Not giving up is the hard part. Well done for getting this far.

9

Regarding fundamentals: I know many succesful traders try to predict future movements by reading reports, analysts etc. But I have come to the conclusion that fundamentals are totally useless. They are totally useless even for position traders. Just do a quick scan in economic sites and you will see top analysts saying completely different things, disagreeing with each other, day after day. Bloomberg currency site is a joke: Hour after hour they try to justify a big movement, and then the movement reverses for no apparent reason and of course they STFU. Hedge fund managers predict what EURUSD will do during the next month and they are wrong 50% of the time (no better than tossing a coin) and they still have columns in online portals and financial newspapers. Fundamentals, by definition, are FUNDAMENTALS. They can’t be changing every day, nor does it make sense for a “fundamental analyst” to change his mind once a week. Now the only reason I read fundamentals is to have a good laugh. Just look at the trends and notice RECENT (relatively to your timeframe) support and resistance levels. Screw the fundamentals.

10

the problem with fundamentals is that they can be very unpredicatable.

11

I feel for you brother… at least you are sticking to it. In 10 plus years of being a wannabe I have never pulled the trigger & opened a live account.

I could be wrong… however; my observation of the Forex market (particularly) is that fundamentals are the reason the market exists… not why it moves. In theory it “should move the market”. At one point (before mass speculation) it probably did. However, from my understanding, the VAST majority of traders are technical traders. Therefore it is you, the fundamentalist, deciding where the market is “supposed” to go based on reality VS the masses that trade on charts… Many of whom probably have no idea what the gdp, employment situation, or trade balance of all the pairs they trade & how they relate to each other is. It is Shia Lebeouf vs Chuck Liddell… both successful - however I can see Liddell being more successful in Shia’s world than the opposite.

I’m not saying fundamentals are worthless… the opposite is true. Find a way to incorporate technicals in with your sentiment on the fundamentals & you could very well be ahead of the people who solely trade the charts. Maybe decide for the day which way the market “should” go, see where it has been going, & if they are the same then enter trades in that direction based on some technical indicators/system/coin toss.

So do you want to be right or profitable? No need to reinvent the wheel… maybe improve it.

my .01 for what it’s worth.

12

The best insight I have seen in a long while.

It really does not matter if it is Fundamentals. Technicals or a toss of the coin.

It really just boils down to if you want to be right or you want to see profits.

And the bottomline is…results.

13

This post is easily one of the most comprehensive, and thorough evaluations of the market I have ever seen in any forum on the net.

And it is the basis for the way I trade.

Ironically, the majority will never get the basic simplicity of it.

All the best!

14

To TS, take a couple of weeks break to recharge yourself…take care!

15

Thanx for sharing your story with us. Hope you find a way to start trading again.

16

Toss of a coin?

Take it easy dude.

17

One buy side analyst said a very simple thing during an investment banking seminar I attended at school:

The moment any appealing report about an investment appears to market participants, the information is available to all the big money movers immediately.

This means if you didn’t do your homework before hand, its too late - everyone already knows and you’re not getting in at the best price.

By the time you see the article in the Wall Street Journal or Bloomberg, people have already acted on that information, and as someone here pointed out, the job of the analyst is to find cause to explain effect. They’re in fact simply guessing based on interviews with various currency strategists and traders, taking a sample of opinions and hoping that sample paints the truth. If the sample was truly large enough we’d get close to the truth, but no analyst has time to call over 30 people (the statistical minimum for determining correlations) to get an opinion for an article. Besides, accuracy is not what they really get paid for.

The main goal of fundamentals appears to be to find out which THEMES are moving the market, and to weigh one group of stories for one pair versus another. You have to be on the lookout for what the big boys are on the lookout for, e.g. various data releases that help confirm or fail to confirm certain hypotheses, and how that plays against or toward sentiment. Some stories are ‘priced in’, others are not, and that is what the name of the game is. What matters are not the actual facts, but the market’s response to those facts. Therein lies the secret, which I am still working on understanding :o

18

The biggest mistake beginners make is that they’re always talking about pips, but they have no meaning. What really matters is the money$$$. For example, I trade 4 stds lot, My SL is 17.5pips, profit from 10pips to 15pips most time. It is $400 to $700. People talk about making 100pips, but is it mini or micro lots?.
Anything less than 1std lot is a demo. Demo(10%) + psy (90%)=the real thing. Also, remember that it took me 3 years before I could finally accomplish what I wanted to do; to trade for a living.

19

pips does matter, as long as you’re also stating the RR of your trade.

20

On hindsight i find that my fundamentalist nature tends to get in the way.

All this while, despite all my repeated mistakes, losses and margin calls,

This week, the market was extremely choppy.

Then suddenly the euro started to tank. This made me absolutely mad,

THen it started to tank again and i broke another rule,

I still don’t have a criteria for entering my trades

Observations:

  1. You don’t TELL the market what to do. You respond. Don’t argue with the market, it will always win.
  2. You’re overleveraging. baby steps for baby pips.
  3. it can be frustrating (see some of my posts). if the market is choppy (like on mondays, go for a swim or a run and wait until tomorrow - as ms. scarlet says, “after all, tomorrow is another day”.
  4. Rule #1: Never break your rules
  5. practice makes perfect. The entry should not be a problem after trial and error. For me at least, exiting poses the greater challenge - balancing greed and fear.

You’ll get there, but live breathe and eat forex, there’s no replacement for elbow grease.