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Taking today to read "the disciplined trader" by mark douglas. While I have much to work on in my trading, discipline and understanding what has kept me in this loop of doing well and then crashing is my focus this weekend. On Friday I again traded with fear tightening my stops and targets, not wanting to take a loss and acutally created that big loss that comes from a breakdown in discipline like many beginning traders. This book has been on my list of books to read for a while and am glad to be getting to it. I will edit this post with my thoughts on how the book has impacted me.
Not really wanting to post my results from Friday but here they are, desiring to move forward
@Mightynorsman It must be something in the air. Kind of The same thing happened to me.
Reading this kind of books are alway helpfull. So it is a good thing to do.
If you are interested in the audio book of 'trading in the zone' or a DVD-serie from Mark Douglas, just send me a private message with your email address and I will send it to you by WeTransfer.
..... I think I will go listening to it myself while taking a large walk
after going through all your remarks and posted stats I halted for a moment, wondering if I should put in my 2ct ...
If the combines are only a means to learning anything without having to put up real money (except some "course
fees"), you can stop reading here
But I guess, some thoughts about your approach could help - and show that your basic problem has only little
to do with discipline.
Try to see your trading and combine as your business. Doing that, you can easily derive from your daily stats and even from those days when the results were positive (!) why your business proposal is warped. All in all your
trades exactly match a pattern why most retail scalpers simply bleed to death before seeing any sun.
Costs:
In terms of total fees and commissions you are providing a daily income between ~$200 and ~$400 per day to
others, i.e. $4000 - $8000 per month in your virtual business plan assuming 20 trading days per month on average.
Taxes, office, IT equipment, and all other real life facts aside ...
Income:
Only taking all of your >0 P&L days, the average was ~$300 after fees and commissions.
Interim result:
Before risk, your cost/income ratio is somewhere between 0.6666 and 1.3333.
I.e. your business before risk is basically providing a profit share of at least 1/3 with a floor of somewhere between
~$4000 and ~$8000 per month ... to others.
Regarding the interim result: Would you sign such a contract in real life?
Bonus question: Would you sign a contract that additionally allocates all other chances and risks whatsoever on your side?
(As an aside: A difference between the 2 answers measures the size of "hopium".)
-------------- CUT --------------
What business contract would you sign?
- What would be a fair profit share with someone who provides the money to start your business?
- What would be a fair floor that you guarantee to that person/institution during periods when you don't earn money?
- What would be the right scale considering these figures (at the moment you choose a virtual 100k line)?
- What is your leverage on income? == What do your see or know that others don't? == What is your edge?
Hey Choke35,
Thanks for your thoughts and comments! I'm not sure I completely understand what you mean but will try to respond to your thoughts below as best as I can in the way that I understand them.
Thanks again for your comments, it seems you are saying that the main problems in my approach are:
1) The high commission costs of scalping and how that seems disproportionate to my revenue
2) My recorded results are just not good enough to pay for the cost of doing business that way, especially when taking all the risk. Therefore I should change something (I think you mostly mean the style/length of my trades and reduce the number of my trades)
I too like to think of my trading as business and try to approach it in that way. Usually this would mean a trader would look for longer time frame trades and place less trades which would extend profit possibilities and shrink "business costs" or commissions. And in fact I am not opposed to longer term trading and hope to one day be proficient at swing trading as I definitely see potential there for great returns on investment. I have however come to realize that, for now and the forseeable future, it does not fit my needs or abilities well.
I view the commissions and costs of scalping as just that, they are a cost of doing business and are factored into my trading plan. My research and experience is not exhaustive for sure but in all that I have done I have found that "scalping" small amounts each day theoretically allows me to keep risk/drawdowns small and adds up over time to an acceptable profit. Whether I spend $10 a day or $1000 a day in business costs is irrelevant to me as long as my business is able to profit in parallel as my plan lays out. Of course I do want to keep costs down as much as possible (ie. getting the lowest commission rates I can) and am always willing to analyze my process to see what I can do better but in the end I do not fret over paying high or low commissions as long as it's producing the results that I am aiming for.
Several reasons I view scalping as more beneficial for me are:
1) As I said above it allows me to theoretically take smaller drawdowns producing a smoother, more consistent income
2) It fits my perceived edge and personality better at this time in my journey
3) It allows me to gain trading experience much faster as I am able to place many more trades per day/week/month than if I was trading as I have attempted in the past for daily or weekly time frames.
Lastly I would say that I agree with you, that my trading results need to be better, and that is my goal as I work through this journal towards becoming a professional trader. As far as my thoughts about Topstep Trader and the opportunity they present I believe it to be real and of value. Becoming a funded trader is not a job that should give me a salary if I am not producing any profit. It presents, in my opinion, a way to test myself and learn without risk of ruin but with some real risk in the "combine fee" and possible opportunity. If I am to get funded and achieve that goal I would be happy to sign that contract for some period of time and hopefully learn and grow as a trader through the whole experience. Would I eventually want to leave and trade completely for myself? I would think so, as long as I have confidence in my experience and abilities, but that is a question for down the road as I have many bridges to cross before I get there. I hope this addresses some of your thoughts in an understandable way.
ad 2):
Even on >0 P&L days the average losses per trade are regularly (way) above the average gains per trade.
One obvious leverage would be to raise the selectivity of your trades (which would simultaneously lower
your costs).
That's what I meant with "hopium". A well-known cognitive bias.
(If you like some bedtime reading: Daniel Kahneman's "Thinking, Fast and Slow" devotes a full chapter to that bias: 24. The Engine of Capitalism)
ad 1):
Only considering your plus days, that might be true (the stats didn't show the individual trades).
But your losing days exceed even swing and position trading standards.
ad 2):
In general, there's nothing wrong with personal inclinations towards short-term trading.
But the perceived edge is still improvable
ad 3):
True as long as you don't adopt bad trading habits.
Fully agree. The fees are much lower than "real market tuition" would ever be for most traders.
Thanks again for your input. I think I can agree with you on several things and will have to agree to disagree on a couple of things, atleast for now.
I'm sorry I don't know exactly how to multi-quote here but I put my response in bold. I really do thank you for your time and thoughts. It's only through discussion and questioning the process that I can get better. The book "Think fast and slow" has been on my list to read for some time as well. Hopefully I will get to it soon. Have a great day,
Mighty
So after reading "The disciplined trader" by Mark Douglas and working on how to implement some of the things I found beneficial I re entered the combine. I do feel that little by little I am grasping the skills better and better that I need to do this successfully as a professional day to day.
One quote that really struck a cord for me was "If the market's behavior seems mysterious to you, it's because your own behavior is mysterious & unmanageable"
Some of the key take aways for me were to
1) think in probabilities
2) recognize what state of performance your in (similarly as I played sports I can relate to this idea well, I know when I was nervous especially in tournaments I would get out of breath easier and not be as aggressive, and it would change my ability to perform well)
3) To be a professional I must have good self discipline, good emotional recognition and control, and learn the skill of adapting or changing my mind to be in the flow of the markets.
Here are my results for Monday and Tuesday 8/22/17 and 8/23/17
Well Journal here I am again seemingly stuck in a vortex of boom and bust cycles. I have made progress and I continue to trade in a TST Combine as it is, albeit expensive, an accountability track record. I am able to glean some good data from it and have found that I am treating it much like a real account as I see it as my true opportunity to enter this world of trading in a much more systematic and professional way with true accountability from people who understand trading.
I have taken a step away from this small journal partly from laziness and partly because of working through a few different things in my trading that I guess I just didn't like others to see. Anyway I do enjoy the community and I know that the accountability to other traders can only help me improve so I hope to get back to posting in full next week.
Later this evening I will post some of the results I have been having and discuss them.
Thanks to my friends on here for their comradery
Mighty
Well I had a post all written out but something happened when I went to post it and then when I came back to it, it was gone. I have not been able to get previous results posted but hope to sometime tonight or tomorrow morning. I am striving to find a better format that includes more of the mechanics of my trading and a lot more about the psychological side of my trading.
Today I traded with a lot of apprehension or fear most of the morning which usually translates into either very little profit or a large loss. I took a break and did a few other things and came back to trade well and the market gave me some good opportunities with better movement and volume just before lunch. The more I am able to be aware of 1) market conditions and 2) my psychological condition the better I am able to eliminate trading errors.
I am done for the day and will be jumping on my 30 year old Honda for a short ride up in the Adirondacks and then finish off the day with a swim and cookout with family at a lake up there. I will be hard at work first thing tomorrow morning to get my pre market thoughts posted and have my results posted. Have a great afternoon and evening all!!