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New to futures, trying the "improbable"


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New to futures, trying the "improbable"

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  #11 (permalink)
 
suko's Avatar
 suko 
Kyoto, Japan
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Experience: Intermediate
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PatrickBateman View Post

We are both business school graduates with finance backgrounds, working in various industries all the way from Mergers & Acquisitions, Real estate, business management, etc.

WGAF about your backgrounds?

Trading is about developing your risk intelligence.

That amount of volatility indicates a low risk IQ.

Focus on getting humble.

Instead of worrying about PL, tell must yourself that it's going to take at least five years to get profitable, probably more, and that you must go to any length necessary to stay alive long enough to learn what you need to learn to get profitable.

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  #12 (permalink)
PatrickBateman
Kansas City
 
Posts: 7 since Dec 2016
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SoftSoap View Post
If you're looking for feedback you should provide us with more information. What instrument are you trading? How many contracts? What's your risk/reward? Approximate size of the account? Win%? Expectancy? How many trades per day?

Also, I hate to be the one to say it but if you can lose 65% in a matter of days, be prepared to lose your account. With swings that huge, it's not a matter of if you blow that account, it's a matter of when.

What you guys are doing with the big % swings up and down is bold. I'm going to quote @suko when he says that "there are bold pilots, and there are old pilots. But you don't see many old and bold pilots".

The beginning stages of trading are all about capital preservation, and when you just focus on profits, you are furthering the odds of making it in this business against you. You said it's not a big loss if you guys lose your entire account, but you don't have to blow up an account to learn about prudent risk management.

Coming on FIO is a good step towards improvement, though, and I suggest reading through some of the threads on here. At $100, the elite membership provides you with significant value at very little cost. There are lots of useful webinars and threads that are only accessible to elite members.

You should also think about starting a journal and tracking your process, trades, and so on. This will help you identify your strengths and weaknesses, and it'll let other traders chime in on things you might not be doing as well. FIO has a ton of good journals to read to get some ideas.

Cheers.

Certainly focusing on risk management moving forward, but to be honest, to really leverage this small account, we are OK with high risk. now managing that down further is the goal, and as you stated is something we will certainly strive to do. Thank you for that input. Will certainly check out the elite membership as well. Good idea on the Journal. Perhaps I do that and if so I'll link it here so you can check it out.


SoftSoap View Post
Also, just because you felt numb to that loss, doesn't mean you are numb to losses (anecdotal fallacy). That's a pretty bold absolute, an unlikely one, and one that you shouldn't want to strive for.

Trading psychology isn't about being numb to emotions, but about understanding what triggers those emotions. Then being able to put them aside so that you can still make adequate trading decisions. Almost everybody feels emotions, we are humans. Accepting that is the first step towards being able to keep them in check so they don't affect your trading.

Just a thought.

Good point. What I mean by numb is that it doesn't get a rise out of me and I am able to continue thinking rationally without panicking. Of course losing money sucks, I'm not here to lose money but to learn and become profitable over the long run. Losses are going to be inevitable, however, so I better be able to act rationally, whether I'm up or down in an investment.


suko View Post
WGAF about your backgrounds?

Trading is about developing your risk intelligence.

That amount of volatility indicates a low-risk IQ.

Focus on getting humble.

Instead of worrying about PL, tell must yourself that it's going to take at least five years to get profitable, probably more, and that you must go to any length necessary to stay alive long enough to learn what you need to learn to get profitable.

We are very humble. Has a lack of humility been displayed in anything I have written? I stated our backgrounds to give context, not to brag. There are many people who have more experience in both academia and the working world than we do. Our backgrounds do not make us better than anyone else but do influence who we are as people and working professionals, so it is relevant to the discussion at hand. If you are particularly annoyed by that comment you may be overly sensitive for a reason unbeknownst to me.

I agree with your last point, certainly emphasizing trading the setup and not the P/L moving forward. This has been a very fun experience so far, and I look forward to continuing to evolve as a trader.

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  #13 (permalink)
 tamparay 
tampa florida/usa
 
Experience: Intermediate
Platform: TOS, Gain Capital
Trading: Emini
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Sounds like you may have a bit of an issue taking a loss when you should. (iE: when they are still small). One of the prior posts mentioned with the huge swings you are allowing it is not a matter of if you will blow up, it is a matter of when. I would agree with that. You also mentioned that when you were paper trading they were all winners. That is just not realistic in the real world. I believe it was Ed Seykota who said "if you are unwilling to take a small loss, sooner or later you will take the mother of all losses." Don't want to sound like a jerk but A 65% haircut inside of two days is just poor money management.


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  #14 (permalink)
 Raider 
Canada
 
Experience: Intermediate
Platform: NinjaTrader & Jigsaw
Broker: Rithmic
Trading: ZB UB
Posts: 143 since Dec 2016

The beginning stages of trading are all about capital preservation, and when you just focus on profits, you are furthering the odds of making it in this business against you.

These sorts of opinions are the reason I believe futures.io isn't like other trading forums.

Anyways, I'm trying to do something similar to what you are, also with a friend. Out of curiosity what business school did you go to, and do you think it helped with anything trading related?

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  #15 (permalink)
PatrickBateman
Kansas City
 
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tamparay View Post
Sounds like you may have a bit of an issue taking a loss when you should. (iE: when they are still small). One of the prior posts mentioned with the huge swings you are allowing it is not a matter of if you will blow up, it is a matter of when. I would agree with that. You also mentioned that when you were paper trading they were all winners. That is just not realistic in the real world. I believe it was Ed Seykota who said "if you are unwilling to take a small loss, sooner or later you will take the mother of all losses." Don't want to sound like a jerk but A 65% haircut inside of two days is just poor money management.


Sent from my iPad usingfutures.io futures trading

Certainly was poor management. And absolutely provided an invaluable lesson, even considering the cost of tuition. We both are certainly working on learning when to cut the losers and let the winners ride. Do you recommend any reading material you can point me to that touches on that?


kentonpalmer7 View Post
The beginning stages of trading are all about capital preservation, and when you just focus on profits, you are furthering the odds of making it in this business against you.

These sorts of opinions are the reason I believe futures.io isn't like other trading forums.

Anyways, I'm trying to do something similar to what you are, also with a friend. Out of curiosity what business school did you go to, and do you think it helped with anything trading related?


100%. Well said. That will be on our minds moving forward!

PM me about the school and I'd be more than happy to answer any questions you may have. I do think it helped, but not to a degree where I have any significant advantage as a trader. I took one course in particular (Futures & Options) that was a higher level finance course and was my first introduction to futures. I met a good friend of mine in that class and he has started a very successful fund in the 7-8 years since graduation.

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  #16 (permalink)
 tamparay 
tampa florida/usa
 
Experience: Intermediate
Platform: TOS, Gain Capital
Trading: Emini
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Mark Douglas wrote a couple of excellent books on trading psychology. I would recommend Trading In The Zone and The Disciplined Trader as two to start with. (Look on Amazon) They are a bit more broad market based but will definitely help put things in the proper perspective from a mental approach point of view.

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  #17 (permalink)
 
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 aquarian1 
Point Roberts, WA, USA
 
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Tks for posting.

Sounds you're ok with the risk and reading between the lines will just put more $$ in if required.

I'm sure you know this, but you can trade USO (oil ETF) instead of CL contracts - though you'll lose leverage.

One point Gann made was that you have to have enough capital to get to the point where your trading experience can bring you forward, He suggested lots of study before starting and then only investing 1/10 of your capital on any one trade (though he had a very high win:loss ratio) and so the 1/10 on trade two is a lesser amount etc. Then is you had 3 or 4 losers in a row stop and figure out what is wrong. If you get a hot streak don't increase your bet size and if you have a huge win put 50% away in a separate account for emergencies.

Most people on the board will quote 2% per trade - of course that is with a small difference in the win:loss ratio.

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  #18 (permalink)
 Dionysus 
Monterey, CA
 
Experience: Intermediate
Platform: Ninjatrader
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Howdy, Pat. . .

The big question that leaps out to me after reading this is, how did you determine you'd found real edge, i.e. a setup worthy of trading? What was your process, broadly speaking, if you don't mind my asking?

You mentioned paper trading it, how long was this period of time, before you decided to take the plunge into live trading?

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  #19 (permalink)
PatrickBateman
Kansas City
 
Posts: 7 since Dec 2016
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aquarian1 View Post
Tks for posting.

Sounds you're ok with the risk and reading between the lines will just put more $$ in if required.

I'm sure you know this, but you can trade USO (oil ETF) instead of CL contracts - though you'll lose leverage.

One point Gann made was that you have to have enough capital to get to the point where your trading experience can bring you forward, He suggested lots of study before starting and then only investing 1/10 of your capital on any one trade (though he had a very high win: loss ratio) and so the 1/10 on trade two is a lesser amount etc. Then is you had 3 or 4 losers in a row stop and figure out what is wrong. If you get a hot streak don't increase your bet size and if you have a huge win put 50% away in a separate account for emergencies.

Most people on the board will quote 2% per trade - of course that is a small difference in the win: loss ratio.

All the best

Aquarian, you are correct in that we are ok with adding money. I appreciate your diplomatic way of responding. You had some good info. I like the idea of putting away 50% if we have a huge win. We traded again today (setup with new broker) and had a very small win. If I let it roll, it would have been a very large win. However, I made this decision because I need to build the account up, and therefore have adjusted my risk tolerance. I have made this similar trade many times and usually am on the winning side, but again, after losing so much, I need to be overly risk averse until our equity is high enough to bear more risk.

Good point on the ETF. I specifically like CL and other futures (trading softs now also) because of the leverage... thank you for another possibility, however!



Dionysus View Post
Howdy, Pat. . .

The big question that leaps out to me after reading this is, how did you determine you'd found real edge, i.e. a setup worthy of trading? What was your process, broadly speaking, if you don't mind my asking?

You mentioned paper trading it, how long was this period of time, before you decided to take the plunge into live trading?

Hello Dion,

Our process involved a lot of losing... through a study of WHY we were losing (mostly entering into a market that was sideways and essentially gambling on the direction it would go to) I discovered a way to make profits *MOST* of the time. It involves leaving a bit of money on the table (It won't generate the highest returns possible on any given day) but I'd say can capture 50-60% of price action on any given day in the market.

Paper trading: We made paper trades for about 2 weeks before going live. We planned on trading longer on paper, but we noticed some fundamentals that prompted us to enter on black friday and we made a bit of money on that day. I truly believe in trial by fire, and since we are trading with expendable income, I learn far more in the actual market than in demo situation, and will not lose my house by doing so.

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  #20 (permalink)
 
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 aquarian1 
Point Roberts, WA, USA
 
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I'm sure you'll do well.

Sometimes, with little capital, one needs to take big risk if one is aiming for a big win.

The nice thing about trading is that it gives freedom to express one's individuality.

I don't really think there is any correct way. Market Wizards makes that point.
If there were you would just read a set of books, do a set of exercises and away you go to the endless cash machine in the sky. (Not sure why it is in the sky LOL)

When one thinks about it a conventional path that can't be the way to success. If it were the banks and hedge funds outgun all of us retail, in money resources, computer resources, and pocket to hire tons of eggheads to design complex algorithms.

The retail trader has to be an optimistic maverick.

Keep us informed of your successes!

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