Trading journal

SovoS · March 8, 2021, 10:27am

This is a very common and difficult issue for many traders. It is also totally understandable!

It is clear that if we are interested in trading markets then we will also be very interested in learning about them and following their developments. But if we follow what is going on in these markets then we are naturally also going to form opinions and views on what is happening and what is likely to happen in the future. We are humans, therefore we have logical thought processes that have been deeply embedded in our thought mechanisms.

But we also know that our knowledge of factors affecting prices is incomplete and that others have different views, even opposite views.

If we place anything on our charts, whether it be indicators or various lines, then we have to accept that their only purpose is to tell us what the majority of other people are actually doing. Not what they are thinking but where they are actually placing their money. . And we need to remember that people don’t place trades because they think the price is right, rather because they think price should be somewhere else, either lower or higher.

So the sole purpose behind us engaging in Technical Analysis is to tell us what the majority is doing. And until that agrees with what we personally believe we have no justification for placing the trade. Otherwise we are just competing with our own TA, which is not very logical at all!

So, you are correct, it is fine, and even inevitable, that we decide what we want/expect to see, but we actually trade when we see it happening. The difficulty is in the patience and discipline and the strength to avoid the FOMO!

It is clear that most new traders lose money and seek the reasons for it in their strategy and therefore keep changing the strategy. But, as you have observed, the problem often lies in our own mindset regardless of what strategy we apply. And until we accept that and address the issues there (as you are doing!) we are not going to find the right strategy, unless it is a mechanical system that disconnects our brain from the action. I haven’t yet seen any retail trader that has successfully found such a system that works long term consistently (maybe it is out there somewhere, in which case I look forward to a nice pina colada with you on a hot beach somewhere discussing the various colour options for our Lambos )

dushimes · March 8, 2021, 10:38am

I’m gonna share something that may be of use to others on this forum. I’ve had a few moments that I felt terrible.
About a year or so ago, and again about two weeks ago.

One year ago, I was emotionally in a downward spiral. I felt like I didn’t have anything to live for. I was thinking “I’m going home and taking a bunch of pills. And if I wake up, I’ll continue. If I don’t, whatever.”

I decided that if I feel like I don’t have anything to live for, then I have to find something.
This is where dreaming about your future, or thinking about others comes in handy.

Whatever keeps you going, keep focused on that. Talk to someone. If you have no one to talk to, then call a suicide hotline. I’m not kidding. I used to volunteer at a women’s shelter. Sometimes, people call just to talk. And that was ok.

My two rules are:

don’t kill yourself
don’t quit

All I have to do is follow these two rules. This may sound stupid to some people on the forum, but this has helped me. When I feel really bad, all I have to do is outlast the sadness. Soon, enough time will pass and a little optimism can creep in. I just gotta wait it out.

This is where dreaming about your future or thinking of others can be helpful.

Whatever keeps you moving. If you feel suicidal or depressed, talk to someone.

I used to volunteer at a women’s shelter, and there was a hotline. There were regular callers who just needed someone to talk to. Not even an emergency. And it was ok.

This may seem stupid to some people, but for me, this is a part of trader psychology. Until we learn to seperate our emotions from our trades, the market will trigger some nasty emotions from us.

dushimes · March 8, 2021, 10:47am

Just found the DXY on trading economics. Thanks!

I’ll probably have some questions about it later.

dushimes · March 8, 2021, 1:48pm

SovoS · March 8, 2021, 2:01pm

That was a very brave post from you, @dushimes. I want to say some words about your last line here.

This is an extremely important issue. But it is pretty much impossible to separate emotions from our trades. So what can we do about it.

The first thing is to recognise and accept that what we are trading is not this or that instrument, it is just “probability”. Every trade either goes right or wrong. So we have to accept that loss is an integral part of trading as much as our platform and our equity. Losses are normal. You cannot make profits in trading without making losses. The aim is to make a net profit.

In the same way as a retailer has to buy goods and pay overheads like rents, energy costs, office expenses, in order to have goods to sell. And that is fine as long as the gross sales exceed the overheads. We seeks net profit, not a gross profit. We really need to understand and accept that. Losses are an overhead and need to be managed as such…

This is why loss management needs to be a clear element of trading structure. Once they fit the overall plan and expectancy we are no longer distressed over individual trade losses.

The stress over losses comes when we start to focus on each individual trade and lose sight of the big picture. Also when they are allowed to exceed our limitations and control or result from trades taken outside of our strategy parameters.

A comprehensive trading plan including loss management as well as profit targets, clear entry/exit rules, discipline to stick to it and patience to wait for it. But maybe that just makes trading very boring…

SovoS · March 8, 2021, 2:01pm

I’ll settle for a red one!

dushimes · March 8, 2021, 4:13pm

I agree. I’ll repeat it more accurately…

I think it’s best to seperate emotions AS MUCH AS POSSIBLE from trading. So, losing sucks, but your feeling “meh”. And when you win, “cool.”

I’ve learned from Patrice Oneal and David Goggins that when your environment becomes turbulent, you have to stay in a stable mind frame.

You can’t base your happiness/mood on something that fluctuates. If you win a trade, you celebrate; if you lose, you feel depressed.

This is too random. There’s no will or self-determination. How about just try to be happy no matter what the outcome? And try not to let anything compromise that.

You can either celebrate the wins, and not sweat the losses; or just be neutral in both cases.

I prefer the latter. Win/lose, my reaction is 90% the same. That’s my goal.

@SovoS That 10% is what you’re talking about. Impossible to completely remove all emotions.

SovoS · March 8, 2021, 4:28pm

This does not have to be the case at all. What I was trying to say is that losses are part of the total picture, and if they are accounted for upfront in your trading plan then there is no bad feeling at all.

For example, most people own a car. Every day the value of that car drops. But do we go to bed grieving about it? No, because we were already aware of it upfront and we gain more from the benefits of having a car than the loss in its value.

Trading is the same principle. If a trader says to you that he/she has an overall win rate of 50% and that the losing trades are all 30 pips and the winning trades are all 80 pips, would you expect them to be grieving over their losing trades? Would you suggest that they give up trading?

Losses require the right mindset. Most things in life are a compromise, most businesses and jobs have a downside and an upside, most personal relationships have ups and downs. The mindset is that in order to benefit from the upside we need to tolerate the downside. Only when the downside is worse that the upside do we need to think about quitting. As long as your losses are contained and your profits are running there really is nothing to be depressed about!

MattyMoney · March 8, 2021, 5:14pm

I’ve been here too many times too admit. And Monday’s are the worst for this, which is why I don’t open or close trades for the first half of the day.

First, stop trying to make money. Focus on your trading, on the pips, not the $$$. Scale back to 0.5% or even less for a while, trust me it will do your head a lot of good, and you will actually enjoy trading a lot more.

Once you are more confident with your strategy then you can scale up to 1%, but don’t rush yourself. It can take years to become profitable, why not do everything you can to enjoy the ride?

@SovoS, Kudos to all your valuable advice in here and on this forum as a whole.

dushimes · March 8, 2021, 6:00pm

But arriving at that understanding is part of the journey. Until you accept that losses are natural, and learn not to sweat them, they will expose your emotional vulnerabilities.

As a beginner, you look around at your life and you want something much better. Each trade represents a lottery ticket. Your expectations are so high, then you get slammed back to reality when you hit your stop loss. This is part of the reason rookies hold on to losing trades.

Your expectations were so high, and we don’t wanna come down from that.

It’s an erroneous paradigm. In order to achieve consistent profits, I think we must eliminate it and learn to accept losses for what they are: part of the process.

And no one can do this for us. No one can do this for me.

I gotta stop. Stop what I’m doing, and break down my process. Examine my losses, and figure out a solution.

For example, in my journal log there is a checklist. Early entry, SL includes recent candles, and OCO. (I forget what the 4th item is.)

My recent losses would have been minimized if I had set an OCO. I just thought, “nah, because what if price triggers both orders and they both get cancelled?” So, I didn’t set an OCO for any of them.

One obvious answer to fix my strategy is already right there in my own checklist. All I gotta do is just follow my strategy.

I wrote this strategy with a clear head. A lot of the thinking is already done. I start placing my order, maybe doubt or arrogance enters my mind and can no longer see the trade clearly. All I have to do is just follow the steps I made.

SovoS · March 8, 2021, 7:11pm

This, exactly this!

This is why we write about this things, and why we repeat these same things. Trading really is a journey, and what we learn about ourselves, the markets, the world we live in, as we travel that journey is what makes the efforts all worthwhile. And hopefully brings the rewards that we deserve for the effort put into it!

It also explains what another member here writes about so often, @steve369, that it is so important to protect one’s capital. What we have in our account is money that we can not afford to lose if we wish to continue trading. Therefore dealing with this issue of losses is so critically important in the light of the fact that you raise above: trading is a journey, and we have to survive that learning curve in order to arrive at our destination .

chrisfraser05 · March 8, 2021, 7:37pm

I love the frank talk about emotions and psycology here.

I believe sticking to a set of rules, seeing my trades through wether they were winners or losers gives me a sense of satisfaction and pride.

I say “this trade looks like it’s maybe moving against me, but my exit indicator isn’t up” so what do i do?
Do close it on emotion, maybe save a few pips? NO.

“Them’s is the rules” i say. It might turn around, my exit indicator might tell me to get out, or my TSL might stop it.

Having a set of rules i stick to keeps me from worrying about the actual trades, and gives me a focus outside of my crappy job.

I can review my rules at the end of the month, were there any changes I could have made that would have improved my overall outcome?

Success to me is sticking to a process, seeing it through, and then slowly developing that process to make it profitable and sustainable.

I don’t go thinking about the colour of Lambos though, that’s just silly… I’m getting a gunmetal Aston Martin V8 Vantage in 3 years lol

dushimes · March 8, 2021, 8:19pm

I had to look up what that is. Very good taste! I hope you don’t go all that way and get an automatic transmission. Manual is the way to driiiiive!

And yes. I believe that sticking to a set of rules is a healthy discipline.

I think we’ve all closed positions just to watch price reverse in our favor shortly after.

You’re right for sure. Letting price hit your stop takes discipline. Because if you don’t let price hit your stop, you won’t truly know if your stop placement was good or bad.

Setting rules is great. Following the rules is the harder part. That’s where you meet your true self.

I’ve been telling myself, “be more careful, be more careful.” I saw the tip of the green candle form when markets opened Monday, and I did the exact same mistake all over again. I’m supposed to use my journal entry and work through my checklist. I didn’t even think twice about it.

I opened my position and went to sleep. I could feel the adrenaline stopping by logical thought process. My greed was so intense, I literally couldn’t think logically.

I almost felt like an addict. When I saw my stops got hit, I realised I’m stuck at a very serious hurdle.

It’s time to stop for me pause, evaluate, and fix my problem. The first step is acknowledging you have a problem.

My problem is impulsive trading.

chrisfraser05 · March 8, 2021, 8:27pm

Have you heard of NNFX? No Nonsense Forex?

Rules based, algo based, trade once a day and don’t look again till the last hour of the daily candle close.

Really takes the emotion out of it but at the same time gives you lots of scope to test rules and make it your own.

steve369 · March 9, 2021, 3:32am

It’s also a fast track to oblivion. I always cut a losing trade - and it IS a losing trade - when it reaches c.75% on the way to the S/L. And use the savings to fund another trade. Always.

Why?

Mathematically, the odds of it hitting the S/L, i.e. the last 25% of it’s travel, outweighs the odds of it reversing the 75% journey back to breakeven, let alone becoming profitable.

Why new traders let it run is clear from the above sentiment - ANYTHING to AVOID suffering the pain from losing by hoping the trade will reverse. It’s an psychological emotional decision, and could also be based on the trader wanting to be proven right by letting it run.

As I’ve stated many times, I hate losing as much as anyone, but I hate losing big, more so. And that could happen if it hits the S/L and the trader impulsively decides to next overtrade by revenge trading etc.

A simple solution if you accept you got it wrong is to exit quickly, and wait until there is another opportunity to enter again when it IS going in your direction as a profitable trade.

chrisfraser05 · March 9, 2021, 4:59am

I agree and disagree in the same breath.

If you are discretionary trading have an arbitrary stoploss position, and have reason to believe that the trade has gone wrong, then letting it hit the SL anyway is a pointless and pip wasting exercise. Cut your losses as soon as you know it’s going wrong.

If you are using an algorithmic/mechanical strategy and have your stop losses set to a specific point AND are using another form of exit indicator that will more often than not get you out of a trade BEFORE the SL, then you wait for one of the other.

By all means you can and SHOULD review your closed trades regularly, and test to see, would tighter stop losses reduce your losses more, would it actually have reduced your wins too?? By how much?
If your review shows that you would be better with tighter SL positions change it and keep more.

By stepping in when you THINK a trade is going against you when you are algorithmic trading, it’s just the same as getting into a trade when you THINK it’s setup, even when your indicators or rules don’t say so.
It’s also the same as cutting your profits too early, or too late.

Test, adjust, see what would have worked best from a probability standpoint and stick to it, or just go to discretionary trading and don’t bother with Algos.

steve369 · March 9, 2021, 6:27am

Good POV, Chris. I’m pretty positive that forex trading, as other markets - and maybe the planet - will be dominated by IA within a few years if not sooner. Mainly because they would be advanced enough to iron out your uncertainties. Therefore the discretionary trader would most likely be at a disadvantage.

I accept that, but in the meantime I am relying on my market understanding and what the charts are telling me. As an aside, when Soros took on the GBP, at one point he had half a billion position against him, but he was confident that his reading of the market was fundamentally correct. And hence made history when the BoE succumbed and reduced the £ value.

Algos can’t do that, right now…

SovoS · March 9, 2021, 8:18am

So few words that say so much! Well said!

Kathlyn_Pollich · March 9, 2021, 2:31pm

Every trader needs to maintain discipline. If you can’t maintain discipline, you can never make money. Part of the discipline is the trade journal that every trader needs to maintain.

dushimes · March 9, 2021, 11:15pm

No trades today. I got itchy to open some trades as I flipped thru the charts. But, I resisted.
I wanted to catch up on my journal entries before I opened any other trades.
I do a list and tally of my mistakes:

I seriously didn’t want to do this. It puts the truth in my face. But as I did it, I felt better because it’s showing me my pattern; more importantly, it’s showing me the solution to each problem.

This isn’t the first time I’ve done this. I’ve done this chart monthly for the last three or four months. The hardest part is actually putting these solutions in action.

I’ve broken my rules so many times and apparently losing money isn’t enough. So, I had to introduce some kind of punishment.

My inner dialogue went like this:

Discipline: Every time you break your trading rules, I’m making you take an ice cold shower for 3 minutes.
Me: Oh, man. Ok. I’ll be more careful.
Discipline: We have a deal?
Me: Deal.
Discipline: Get in the shower.
Me: What? Why?
Discipline: You’ve broken the rules just a few days ago. Get in the shower.
Me: Please, no no. Next time, I promise I’ll do it. I won’t break the rules ever again!
Discipline: Get in the shower now!!

I’m totally serious. I could feel myself begging not to go into that cold shower. But, I have to introduce some kind of negative association with breaking the rules. Not with losing, but with breaking the rules. I’m a very stubborn and hard-headed person. I don’t like to change until I’ve been wrong so many times that I’m forced to change. That’s my pattern.

If I’m gonna take trading seriously, I have to act like it.

The water was so cold, my body went into shock and I had trouble breathing for about 30 seconds or so. The goal is not to hurt myself, but to make myself extremely uncomfortable. A cold shower is the perfect tool for this.

During the shower I repeated over and over: I will follow my trading plan.

That was my morning. After that, I started updated my journal and statistics.