This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Here’s my PnL chart since I started Prop Trading at the end of July on a % equity basis. When I was up 30% I posted my Best Day Ever post. Since then, a solid downtrend. Trader Mike is now thumping me big time. My win / loss ratio stands at 38%/63%.
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
August 30th, 2007 at 11:38 am
i’m calling a trading bottom in prospectus account…this is a higher low confirming the uptrend…all my indicators (stochastics, macd, volume) are showing a positive divergence
August 30th, 2007 at 11:42 am
15% still beats the buy and holders
August 30th, 2007 at 2:29 pm
Prospectus, two and a half years after I started daytrading, I am no longer losing money. In fact, I never ever lost money for I kept my stops in place. Jamie said it takes 3 years to become proficient. I think that number is accurate. The more we see the market, the more we become familiar. I decided to quit today after about 1 1/2 hours. I don’t know why exactly. But Richard mentioned he may give up as well. Was that a coincidence? That is not something you learn. It is something you feel. I have tried to put a finger on what I feel to be an inappropriate time to daytrade or not. But I can’t. I hope this post doesn’t sound condescending. As a trader we must have a feel for what is the right time and place to trade in order to exploit our edge. Today was not it. Gap down of 100 points plus, left us in never, never land.
August 30th, 2007 at 7:42 pm
Thanks, john. Hope your read of the chart is correct!
Zoomie: Not condescending at all. Even though I’ve really only been daytrading for a month, I consider all of my trading experience when making a self assessment, which is a little over two years. I feel I should be doing better after all that time than I am. Maybe I’m being impatient and unfair to myself since I’ve really only started daytrading since July. I don’t lose big anymore, since I always stick to my stops, too. I just lose 65% of the time, -1R at a time. If I have a dry spell without big winners, it’s drawdown city, slow and steady.
In either case, I am thinking that I’m focusing on the wrong trading metrics, and it’s been affecting my performance. I’m focusing on winning, on being profitable every day or every week, and watching every tick of my PnL–up is great, down is terrible. Then, when I’m in a drawdown, I trade more poorly trying to get it back, gamble, overtrade, all the mistakes I’m making.
What I should be focusing on is this:
Trade well!
I shouldn’t look at PnL. I shouldn’t think about wins or losses. I shouldn’t care if a trade wins or loses, as long as the trade is based on a solid idea with an edge, preferably with a particular setup and entry and exit rules. That should be my metric! I “win” if I trade well and execute according to prevailing conditions and my plan–period. I “lose” if I overtrade, take revenge or impulse trades, gamble in drawdown desperation, ignore rules, shoot from the hip without setups or a plan, or ignore position sizing rules (too much or too little). The irony is that if you forget about the PnL, you’ll actually maximize it! If you focus on losing $ or ego (when you’re ‘wrong’ about a trade and you get stopped out) then you’ll lose both. I think I’ve proved that to myself.
So tomorrow, I’m not going to focus on winning. I’m not going to focus on being right. I’m not going to focus on finishing ‘green’ for the day. I’m going to focus on one thing:
Take only good trades! No bad trades for the day and I win. A good trade can end up in a -1R loss and still be a good trade. The only criteria are what I said before. Do the goods and avoid the bads.
That is my trading Mission Statement:
“My trading mission is to trade well.”
Nothing else comes before this. I will do my best to fulfill this mission tomorrow, even if it means that I don’t take a single trade. Then I will win.
August 30th, 2007 at 8:35 pm
[...] pointed out on Prospectus’ post that he believes it takes about three years to become profitable. If nothing else, after two years, [...]
August 30th, 2007 at 8:59 pm
Ah. Great ideas. It just takes time. I have been told that I was sabatoging myself when I wasn’t trading well. That mayyyyyyy have been true, but I think it has more to do with experience. I wasn’t taking trades I expected to fail. I was taking trades that I expected to win. Some did, some didn’t. You gotta get in there and trade to find out what works. Hopefully, with advice from pros, one will find the way. Maoxian said it takes several years. I conveiniently ignored him. This profession is like any other. Study, patience, time, more study, discipline, and stubborness. I am not the smartest man who trades, but I am the most stubborn. With the exception of John.
August 30th, 2007 at 9:32 pm
Another note on position size. Money should never enter into the decision to trade. If it does, you are trading too big. I have not looked at my PnL for 2 years in real time. OK, maybe once or twice. Sounds cliche, but trade the chart. Sell at your targets. Minimize losses. Over the last year I traded very poorly, IMO, but made money. The ONLY reason I made money, was because a loss, full R1 loss, was nothing to my overall psyche. It was just another trade. When you get caught up on how much dude makes per day, how much the market went up, and missed the move, how much you shoulda made, if only I woulda…..if you are asking yourself these type of questions, you are not in the right mindset. I am rambling slightly, and not pointing my thoughts at anyone in particular. But, if I have taken any profitable advice, it is TRADE THE CHART. If your risk needs to be a dollar, risk a dollar. If a trader can’t make money risking $100 , how is he gonna make money risking $1000? A loss shouldn’t even make you blink. It is part of doing business. It is capital put forth to enable your business to thrive. Zoomie’s rant is over.
August 30th, 2007 at 10:13 pm
Thanks, Zoomie, for the thoughts. I do need more experience, and I’ll be more patient as I gain it.
As far as position sizing, I still have an issue with 1R losses. Partly because my wins are not usually much more than that, and my win rate is pretty low. Once I take 3 full -1R losses in a row, it does add up and it does impact my psyche. I trade 1% of my account as my usual 1R size, but I notice that after I take the early losses, I tend to cut that down to 0.5% for the next trade, and that turns out to be a +1.5R winner. So I’m still way in the red. Then I go back to 1% and lose. Wash, rinse, repeat. It’s not a loss, it’s 20 losses that are getting me at this point!
I don’t know if I should risk less so it doesn’t affect me, or if I should risk more so that I’m not tempted to take flippant trades. I tend to think it’s only -1R, but then it grows to -4R a day and then…
Thanks again for the thoughts.
August 30th, 2007 at 10:17 pm
Good stuff, Zoomie.
August 30th, 2007 at 10:55 pm
I’ve been trading options actively for about 4 years now, I’ve been pretty successful after enduring a lot of expensive pain along the way, but my buys were more fundamental-based, I wouldn’t buy some random company just because of some momentum. I mentioned elsewhere that stocks like AAPL and GS were my bread and butter. I never bought on margin, and held contracts for days and sometimes even weeks.
I started daytrading in the last few months mostly because momentum plays and scalping is a little more “fun” if you will. My big hauls are still coming from options.
Now what I have found with daytrading is that I’m often “hunting” for stocks and when the options are thin, my guidelines for what I jump into start to get thin too and I’m almost feeling like I “need” to trade something every day, but like some of the others on here, there seem to be days that you just need to walk away; every day seems to be different and if you are off, don’t try to force the day right.
Another thing I leaned quickly with day trading is that you really need good tools, and I’ve raved about it on the forum, but real-time tools like Trade-Ideas are fantastic for the day-trader, I now couldn’t imagine *not* using it (or something equivalent). I know it isn’t inexpensive, especially when you are really watching P/L closely, but really, one great trade can cover it for a year and you just have to think of it like that, almost like a capital expense.