A Psychological Traders Log

I have been looking at a selected journal postings and other comments by mostly newer traders. sometimes I just shake my head. Now keep in mind I myself have made most of the mistakes as well, so my headshaking is at myself as well. But having come somewhat to clarity over forex trading, I see things a lot clearer now - and lets hope it stays that way.

There is one chap who is posting so many posts to try and get new traders to follow him and calls himself a mentor. Oh my goodness. Firstly i cant believe anyone actually responds to that. Newby traders really need to learn the difference between actual good advice and ridiculous advice. This site is full of really helpful people - but - they dont go out with a dragnet to catch a hundred followers. They simply answer when asked.

I also shake me head over and over at newby traders (and I still feel somewhat newby myself, but im not that newby anymore) who start a journal wanting to turn $100 into $1000 or $1000 into $1000000. Now of course everyone would like to do that, but dont start off with that as a goal. In fact one of the worst things that can happen is to have initial success, like doubling your account balance 2 months in a row. Thats great if you are doing so while executing a great risk management - but I highly doubt that is the case.

The difference between being a successful trader and an unsuccessful trader is actually very simple, though some may argue. If all newby traders took the time to read these things and absorb them - then many more of them would succeed. I myself read all of the good advice and knew in my head what i should be doing - but only after failing a hundred times does it sink in that you MUST do the following things if you want to be a successful trader.

These are not necessarily in order.
To succeed

  1. Preserve your capital - do everything in your power to trade in such a way that your capital remains safe.
  2. only enter a small percentage of your capital in any 1 trade (1 - 5%). This is debatable - according to your risk appetite and accuracy of entries, but in principle the smaller the % the better your risk management.
  3. Only enter another trade once the first trade has its stop loss shifted such that if you hit that stop loss, then you either loose nothing (breakeven) or make a small profit). Now I know SL are not guaranteed but they work 99.9% of the time)
  4. when trades start giving you a gain - then dont just take profit - move your SL so that you protect your gain. This of course depends on a lot of things. But the value of having a larger open position protected by Stop losses is commonly worth more than just ending the trade and having to start a new trade - once again debatable depending on circumstances.

Thats it - simple as that.
Now a lot of folks will want to throw in all sorts of other issues here but this is the essence.

Here are the things to do if you want to fail ā€¦ no-one wants to fail!! but if you do things you will fail - just a matter of time, and by fail I mean you make large losses over and over and over. around 2/3 of your account wiped out time after time.

To Fail

  1. Enter trades without a SL
  2. Enter more trades when the previous trades are in the negative - in other words you are continually building a larger loosing position. You donā€™t want to end trades because you dont want to loose. So instead you carry on setting yourself up to loose big time
    3.Enter trades which are 20%, 40% 60% or more of you capital.
  3. close winning trades as soon as you make some minor amount - yes you have made a small profit - but the point is that you are continually ensuring that all your active trades are negative ones and none of them has SL.

and thatā€™s what most newby traders do - and especially if they actually make some good gains initially - that just enforces them to continue doing it wrong till eventually they loose.

Now if you were observant - you will notice that not a single statement above discussed how to correctly enter a trade based on technicals, fundementals or sentiment and thatā€™s because all none if it matters as far as getting those basics right - the basics of risk management.
Everyone is going to get trades wrong - and when you do get trades wrong - then your risk management must control your loss.
If your risk managment plan is very good, then it should protect your capital as mush as possible even if you got many trades wrong in succession.
Once again - this is debatable and my intention is not to look at the area of making correct trade entries.
Most newby traders do NOT fail because they made wrong trade entries, they fail because they had no risk management - or totally inadequate risk management.

All of the above is not to be taken as gospel, it is there to bring some understanding to determining how you are going to start out as a trader - with or without risk management.

There is only 1 way to succeed without risk management, and thatā€™s to get it right 100 or 500 or 1000 times in a row. some really awesome newby traders maybe get 10 successes in a row, maybe a hundred - but eventually when you do fail - it will be bigtime.

The school of pipsychology is the best resource around - use it. do the entire school and all the quizzes, then do it again after a month or 6, then again.

Risk management is covered in great detail and should be regarded as crucial.

If you want to succeed as a trader - start off not by saying you want to turn $100 into $1000, but rather say that you want to have traded in such a way that your $100 would always be as safe as possible, and of course adjust this as you grow, so once you have $110, then your $110 must be as safe as possible. You will make gains - but when you do - then still stick to your risk control measures.

I can elaborate more on issues as required but I think this carries the essential message

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Im back - well i havent really been gone - just been practice trading for the last year.
Back in and ready to make a success of things. And I see the whole layout of the trade logs looks different. I think I preferred the old layout but anyway.

June was pretty good, July not so good but stabilising my expectations. Trading habits much more under control. protection of capital much better.

July ended up not too bad . 7% gain.
August starting off ok, a few small gains, no losses but being pretty conservative.
Risk : reward was awful in July, much better in Aug now so far.
Slight change in strategy not too bad so far.
Running about 15 demo accounts as well (in different scales) to keep me in check

I have one particular problem that hits me harder than any other, and thats ā€˜recency biasā€™, or maybe I can call it ā€˜average biasā€™ where I am more likely to believe that rates will gravitate back to the average of the last X days or weeks, which is a sort of self sustaining illusion in that thats exactly what happens a lot of the time - until it doesnt :).
I need to train myself to stop this! Very difficult!
I guess my 2nd biggest mistake is overtrading - though I seem to be managing this effectively by simply doing my overtrading in demo.

Not going too badly. Half of August gone and even though I have been horribly inefficient, at least I have 5% gain. I estimate another 4% possible. I reckon if I improved efficiency I might be around the 15 to 20% mark

Wow - it actually logged me in as myself, Lets hope that can continue - then I dont need to use the 2nd account I had to create just to get in

I think I briefly mentioned it somewhere - but I should add it here. I find that part of my strategy is that I also apply my strategy on multiple demo accounts. I currently actively trade on about 10 demo accounts, and Im sure I hear you ask, why 10?. Well personally I find it ensures that I dont get stuck (mentally) on a specific account size, being my live trading account size, but that I practice the same thing on a variety of size scales, so I may have a $10 account and I also have a $10 000 000 account. The ones Im trading with most actively at present are $5000, $20 000, $50 000, $100 000, $200 000, 1 million and 2 million. Here and there I use selected others.

Part of my personal impression of my trading is that if I find myself being too risky on my demo accounts, then thats a warning for me on my live accounts. Unfortunately, I tend to always be more risky on my demo accounts - but Im toning it down. The demo accounts certainly serve their purpose in my opinion. I will always use demo accounts alongside live accounts.

Demo accounts as at 28 Aug

5000 - 3925
18000 - 41500
30000 - 79000
50000 - 195300
100000 - 159000
200000 - 449000
1 mill A - 832806
1 Mill B - 2902562
2 Mill - 5756806
5 Mill - 6246000
10 Mill - 10337000

Demo accounts as at 31 Aug

5000 - up 1100
18000 - down 8k
30000 - up 13k
50000 - down 30k
100000 - down 80k
200000 - up 10k
1 mill A - down 100k
1 Mill B - down 500k
2 Mill - same
5 Mill - down 300k
10 Mill - same

Wow - a year and a half since posting. I had wins and losses. recently my longest stretch of smallish wins adding up to gaining back $14k of my losses. Entering into 2019 looking to break even by years end

Ok - got in again as my original user
My goal for this year - to break even. Need to gain back about 30k US
Last 7 months have been continuously successful - but its only success if its successful month in month out, year in year out

I am trading about 7 pairs, and i have started hedging in some cases

well - here I am -back - no not back - I have been trading non stop for 5 years now - but i mean back on babypips. I didnt want to post anything until I had broken even and finally it has happened. The past 8 months have been very good and I made back all my losses, about $25 000. At my worst i was maybe $40 000 down, so here I am, 5 years experience, good gains - big losses and ready to start in the green. and on a different note - this accidentally co-incides with oanda having to let me go because they are no longer allowed to have NZ clients. very sad as i have loved being with Oanda for the past 5 years. So as i break even i also have to change it all up and learn a new platform.

Welcome to the surface!!!

Good luck going green!!

KC

Ive decided to go with IG and Metatrader 4
I do 100% of my trades on my phone now - and for the past 3 years at least. Only used the desktop version in my first year.
My win rate in the last few years was about 94% but thats ridiculously misleading since my losses were huge when they occurred.
Eventually i reduced risk, used hedging, stopped basing decisions on news events, did not use signals, and traded multiple currencies

Worth reading thread.

Btw, itā€™s true that win rate is misleading, like you have all the grades up in school but poor performer on job defines a failure. Keep hittinā€™ man. You got the boost, carry it with you.

How far SL you used in those 6% loss rate? Scalp trade or position trade? SL is truly an art and it depends on your style and your learning determination on indicators you use.

Keep your passion alive.

Well - there you had to go and ask the most difficult question. My absolute weakness. SL. I dont use SL at all because i just cant get it to work in my strategy. So i lost big by hitting margin calls.
I am a scalper. It was about 2900 trades in a 3 years period - unfortunately I lost earlier history by being transferred from Oanda Europe to Oanda Australia - so i only had stats for the past 3 years or so.
about a 1000 trades a year - so if you work out the number of trading days per year i think that works out to about 4 /day. some days more - some less. I think thats reasonably accurate.

My risk to reward ratio was awful - but it didnt matter. I made small profits and i took profit as often as i could. I always imagined it as finding some cash on the ground. I could walk past it and hope it grew larger or just pick it up.
I chose to close any and every trade that had made over $5 gain. It paid off.
am i saying you should trade without SL - hell no. Its the one thing i need to learn to do right.

This was my stat sheet as i closed off with oanda - keep in mind - that profit is in fact a break even because my earlier stats with Oanda Europe are not included