I was short from 1.1260 since almost a week.

Exited the position today, since my target is reached (short of two ticks)



To reiterate the basics blocks of this properly managed trade:

1. Learn how to sit tight

Jesse Livermore's favorite quote!

it never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!

It takes time to make money.

Don’t give me timing, give me time.

2. Learn how to lose - Learn to take a small loss early

There is nothing like losing all you have in the world for teaching you what not to do BUT YOU DON'T HAVE TO WALK THAT PATH; and when you know what not to do in order not to lose too much money, you begin to learn what to do in order to win.

3. Study underlying market conditions and The Trend

I have found that experience is apt to be a steady payer in this game and that observation gives you the best tips of all. Obviously, the thing to do was to be bullish in a bull market and bearish in a bear market. Sounds silly, doesn’t it? But I had to grasp that general principle firmly before I saw that to put it into practice really meant to anticipate probabilities. It took me a long time to trade on those lines.

I did capture the fast and furious upmove in the 6E. The speed of the breakout did not give me time to make my bad habit of taking profit early turn up!

The 6E is now again preparing for a continued down move - just not NOW - there needs to be some more build up and squeezing of the bulls.

Happy to have exited well, happy to have stayed out of trouble after going long into the upmove (but not much longer):

I have been having an interesting one-to-one with a fellow trader, and it started with this heart-rending letter that I am reproducing below, followed by some of my replies in a later post - what do you think your advice should be?:


Dear iqgod

I don’t usually post on forums – I a home-based trader, only trading the E-mini futures and am at a single lot level still. I have traded for many years now since starting from 2005. I left my job to trade full-time years ago. Thus I became a full-time trader in 2014. I haven’t changed my trading style in years and never intend to – I am actually confident of it; however I always am eager to learn and read a lot about trading - psychology, money management strategy, execution improvement, I feel I am reading the real stuff and not snake oil vendors. I have read almost 500 trading books In fact I am an avid follower of Dr. Brett Steenbarger’s TraderFeed blog, as well as the books of Al Brooks, Bob Volman, and Van Tharp. I determine my ‘success’ at the end of each day by comparing what I should have made on the day, against that to the trades I actually took. Thus I review my trades at the end of each day and I consider any day where I made around 60% of what I should have as a successful day!

However here is my biggest issue – I would love to say that am extremely patient and disciplined and sometimes have gone for 3 days in a row without taking a single trade if I don’t like the conditions or something is not clear... However, that is not the case, the problem is I am not well funded and I am always aware of my profit/loss thus I cannot delude myself that it is irrelevant to the next trade. Focusing on being flat/down means I am distracted from what I need to be doing, which is calmly analyzing the market. While I understand that 90% of trading is psychology, I don’t ACTUALLY implement it and end up getting a serious lesson in these cases. Hence my trading career is itself under lot of threat with the pressures of real life.

Also I have to manage two young kids also and they are a lovely distraction sometimes but sometimes have suffered in my trading for this reason. I have no time for workouts… if I improve my body I will improve my self-esteem. I know that if I EXECUTE it properly, every time, I will make money over time as long as my position size is appropriate. I have made a living the past few years but barely so, and it has been a wild ride risking roughly 1/4 to 1/2 of my capital on every trade!!! I cannot simply risk only 1 percent of my capital on a trade and hope to make a living as a full-time trader!
This is actually a great time to be a trader and I know if I work hard I know I can DO IT! I’ve done it before! It’s not easy or everyone would be doing it. However I am unable to find someone who trades actively to talk to and be accountable like e.g. floor trader to a pit boss. I have achieved many things in my life but none of that IQ / intelligence has helped my trading - in fact made it much complicated. Trading consistently profitably and for a living is the most difficult thing I have ever accomplished. It has taken me all these YEARS (more than a decade now) and I am still trying to improve.

While I am not sure if I will ever get to the big money stage currently I make small profits that get us through, but we are on hand-too-mouth existence and I am not sure whether I should be going back to my nice job I left, it now seems, years ago.

Regards,
Trader X

Thanks @iqgod for this letter!

Of course if he is on a good path with small gains - there is only ONE way:
KEEP GOING!

Things will develop itself with this discipline and motivation.

Good trades!
GFIs1

After reading the letter I decided to put together an 'article' series to allow traders to grow faster instead of getting stuck.

This is the first post in this journal with a view of accelerating the learning curve....


A trade's failure can be a step forward for subsequent success if we learn from our experiences. Although we already know that we learn more from our failures than our successes, learning from our failures is not automatic or instantaneous.
We feel bad when we fail. While these emotions provide some learning benefits (they stimulate process orientation, learning, and method adaptation) failure severely interferes with our performance LONG TERM on the task.

Negative emotions interfere with the individual’s “allocation of attention” in processing information which is critical in identifying market opportunities.

This is because the negative emotional aspects of the event receive higher priority in processing centers of the brain than positive or neutral emotions. This emotional interference means that traders prematurely terminate in working memory the real facts that actually preceded the emotional event.

But as we know facts are the basis for learning why the trade failed. For example, in focusing on the emotional events leading up to the failed trade, our mind keeps shifting to HOW the trade was terminated not on the series of events that can be put piecewise to interpret the situation objectively and learn from it.

I hope to demonstrate in this series of posts how to change all of this.

Our brain fools us by focusing on the salient emotional events that occurred in the trade, and makes sure we do not allocate much attention to the information that would serve as important feedback for learning. This is actually a survival tool designed for our long life. Thus insufficient attention is paid to the actions AND INACTIONS that caused the deterioration in our performance and resulted ultimately in the trade’s failure. Here failure means not the pre-planned stop that we had set but, failure as a REAL failure that occurred because we DID NOT FOLLOW OUR RULES.

What actually happened was that whatever limited attention and information processing capacity we had were undercut by our emotional reactions. We know since high school that we enhance our learning and studying capacity when we manage our emotions and recover from our emotional pain more quickly i.e. we eliminate this source of interference in the learning process.

We have to trade in a manner not only to learn from failure the causes behind this specific event, but we learn and develop something special about ourselves. We thus also personally grow from the experience.

As traders we grow so used to experiencing multiple failures – but if we are really GROWING then this does not mean that failure generates a weaker emotional response but that the pain and suffering do not last as long
The more someone is emotionally attached to emotional outcome of a trade, the more he or she experiences the negative emotions when failure causes. To be a good trader, it is important that instead of tying yourselves into knots, you yourself can help yourselves to “undo” these emotional ties to the trade just lost.

Also, you know inside that when it comes to feelings, not all failures are created equal – some trades where you feel confident and then get slapped… or where you endure pain for such a long time that winning seems to be a deserving prize, it is there that you feel worse over some failures than others.

On the other hand, success is a really bad teacher!




“SUCCESS IS A LOUSY TEACHER. IT SEDUCES SMART PEOPLE INTO THINKING THEY CAN’T LOSE.”

— BILL GATES


As I continue I hope to demonstrate in this series of posts how to change all of this.

The emotional pain we feel actually demonstrates that it is not the weaklings who feel this way; in fact it is the contrary – those who have gone through the courage to emotionally commit to a trade, to those who put capital and above all their ego all on the line and gave the trade a go WILL feel emotional after losing.

However when we focus attention on collecting information about why the trade failed and confront the failure head on the process is put in place to see the wounds for what they are – delving helps us construct a series of one or more plausible accounts of the trade failure.

As we develop on the path and learn to assign meaning to the causes behind the trade failure, only then can we can break the emotional bonds to the trade – the reason that was lost earlier when we might have vented or blamed then becomes subtly apparent.

Thus, repeating this process daily ensures that we minimize the thinking that losses = bad and eliminate negative emotions.

A thing to watch out for is that when we focus the cinemascope of our attention on the events surrounding the failure and thus start thinking about the loss is that such an activity can make negativity and the associated memories more real-like and intimidating – sort of like dangling like a damocles sword.

The subconscious mind does not distinguish between past, present and future – if we are thinking about how bad we felt after the trade failed, that coffin moment, it makes us feel bad now, and this makes us feel worse now and so on. There is a likelihood that ruminating on the event will create bigger barriers which lead to prevention of learning from the failure. Being already emotionally exhausted at that point we are likely to enter a vicious cycle.

The key is focus on what just happened and process this information for Adjusting ourselves and how we think about trades and how we act when working on new trades. Thus to the extent we learn from the ‘failure experiences’, we can avoid making the same mistakes again otherwise the cycle continues.
In the next post I explain how to break the loop.