HiLatencyTRDR HLT 

Please anyone reading this understand that pairs trading or combos or spreads can and are highly leveraged trades with maximum commission and lower returns per tick. There is just as much risk if not more than outright trading. It's obvious to me this person or machine is quoting a Wikipedia or other page he found from a quick Google. My biggest losses came from pairs trading. It is extremely dangerous due to the high margin to gain loss Percentages Same risks with less gains and stops mental or otherwise

If the risks are the same, then why aren't the margins the same? Don't think too long about your answer.

Hint: A CL calendar spread requires approximately 1/10 the margin of an outright. I think the CME understands risk better than you.

I think you should study long term capital management and quoting a calendar like you did with 1/10 th margin actually proves my point entirely.

Go ahead and buy or sell 10 calendar spreads versus 1 outright.

What is the margin for both?
What is the commission for both.

The fees and commissions to do 20 round turns or 40 sides
Will prove that from a same margined trade that your calendar will be far more expensive and risky in the long run.

1 rt 3 bucks
20 rt 60 bucks

Oh and I left out slippage costs

You can only dollar cost average as you said for as much capital as you have in your account.

This idea of yours was proven wrong even by those with billions and the founders of option calculations of value known as black scholes. They were just like you in their thinking. But they dca until bankrupt and bailed out.

I'll never forget the day my brother sounded like you and traded some calendar spreads. He complained how slow and boring it was and then he said it's just like trading outright futures except you lose even slower.

I was not attacking you or your idea I just don't want people to think trading pairs doesn't have huge risks because it does along with huge fees and slippage and legging risk. Sure implies reduce legging risk but you pay double the slippage!!!

https://en.m.wikipedia.org/wiki/Long-Term_Capital_Management

Thank you everyone for your responses so far, they have been invaluable. I went back to my trade on Friday and realised I opened it straight into news which is one of my core rules, some how I missed the news event on the calendar. However this is just an excuse and doesn't help in anyway to resolving the issue.

ZviTradingCoach 

You will hear many answers to this question. Many will say you need discipline, you need to have clear rules and just follow them etc. The problem is - I'm sure you've heard all of that before, but it still didn't happen. So the question you need to be asking yourself is - WHY? The true answer is a little shocking, but the sooner you admit it - the better. There is a GAIN for you (possibly one you aren't aware of consciously) in skipping your stops. It's that simple. Adding to losers and skipping stops is GIVING YOU SOMETHING. Otherwise there would be zero internal motivation to do so. And yes, this is what is referred to as "self sabotage". What is it giving you? That's a super-personal question, often subconscious in nature, but profound once you figure it out. I can't give you a full textbook approach on how to figure this out yourself (it's not that easy to do alone, but possible for some), but I'll give you a direction. Ask yourself these three questions for starters: 1. What would I lose/miss out on, if I were to always follow my stop / never add to losers? 2. What would I have to face/feel, if I were to...., that I am in a sense protecting myself from? 3. What do you gain when this generally negative attitude, occasionaly works in your favor? The answers are super-personal: 10 traders will give 10 different answers. Examples (all of which I've heard from real traders with similar issues) could be: 1. I'd miss out the action, 2. I'd have to tell my wife I've lost money, 3. I'd feel like a genius. These hidden benefits are professionally referred to as "secondary gains" of negative behavior. We all (100% of people) have them, on many different issues, and they are at the root of nearly every case of self-sabotage in trading. They aren't easy to tackle alone because most of them are subconscious, but the harsh truth is - unless you identify and deal with the secondary gain, it's likely to continue. And if you "force" yourself to the right behavior on one aspect (as in using apps that lock you out at daily loss limit), you'll easily find a new way to self-sabotage. You have to face and deal with the MOTIVATION for the negative behavior, if you want to move forward. The fact you say that after a huge loss you recollect, run a few weeks and then "back to your ways" suggests strongly there is a subconscious secondary gain that just pops back up, motivating negative behavior, once the trauma of loss subsides. The good news is that once the secondary gain is dealt with properly - there is zero motivation to deviate from what you know to be positive behavior. Done, solved. And it is possible, I've seen it again and again. Once there's no motivation for negative behavior, it becomes a no-brainer. As easy as not running a red light. You just don't. Zero stress involved. That's how it SHOULD be, and I hope that's how it will be for you. Good luck!

Some really great comments here, thank you so much for this. I tell my wife every day how trading goes. Not only the $ lost but I focus more on my failure to stick to my rules and plans - those are the things that frustrate me more than the $ amount and we're lucky at the moment that the money I'm using in trading is considered 'gone' from our bank account already.

The secondary gains are what is really at the core of my problem. I seem to repeat the pattern of build an account up, set an expectation of achieving $x by a particular date and then I push too hard/overleverage and have that one losing trade again. I spent some time reflecting on the weekend, reviewing past trades and my journals and this pattern is constantly repeating.

With $2000 I start with 5 MNQ/MES contracts and have an average daily return of about $200. This includes red, BE and green days. If I extrapolate to trading minis then ~$2000/day is more than sufficient for my yearly income (hell even half that). I use micros as a way to improve my trading style, strategy, work on my emotions and failures and when I am able to I can fund an account with $x0,000 to trade minis.

This sounds absolutely ridiculous when I type it out, but is it possible that by trading micros I am shooting myself in the foot as I should be moving on to minis to achieve the daily profit targets I have as a goal? The reason I ask is that on Fri I had an A+ trade with MNQ that netted me $230, which I should then have walked away with but I wanted to trade again to get another few hundred. My very real fear (and likliehood) is that by changing to minis I won't blow $1500 on Friday like I did, but more like $15,000.

dredmond19800 

Thank you everyone for your responses so far, they have been invaluable. I went back to my trade on Friday and realised I opened it straight into news which is one of my core rules, some how I missed the news event on the calendar. However this is just an excuse and doesn't help in anyway to resolving the issue. Some really great comments here, thank you so much for this. I tell my wife every day how trading goes. Not only the $ lost but I focus more on my failure to stick to my rules and plans - those are the things that frustrate me more than the $ amount and we're lucky at the moment that the money I'm using in trading is considered 'gone' from our bank account already. The secondary gains are what is really at the core of my problem. I seem to repeat the pattern of build an account up, set an expectation of achieving $x by a particular date and then I push too hard/overleverage and have that one losing trade again. I spent some time reflecting on the weekend, reviewing past trades and my journals and this pattern is constantly repeating. With $2000 I start with 5 MNQ/MES contracts and have an average daily return of about $200. This includes red, BE and green days. If I extrapolate to trading minis then ~$2000/day is more than sufficient for my yearly income (hell even half that). I use micros as a way to improve my trading style, strategy, work on my emotions and failures and when I am able to I can fund an account with $x0,000 to trade minis. This sounds absolutely ridiculous when I type it out, but is it possible that by trading micros I am shooting myself in the foot as I should be moving on to minis to achieve the daily profit targets I have as a goal? The reason I ask is that on Fri I had an A+ trade with MNQ that netted me $230, which I should then have walked away with but I wanted to trade again to get another few hundred. My very real fear (and likliehood) is that by changing to minis I won't blow $1500 on Friday like I did, but more like $15,000.

@dredmond19800 This all sounds so very familiar to myself, and I am sure other traders as well. I did some work with @ZviTradingCoach and found it to be extremely useful. I have been trading many more years than you have and still struggled with what I considered discipline issues....struggled terribly. It took some digging to identify the real reasons behind my behavior, and over the last month, things have changed drastically for me, for the positive. For quite a while I have had a method that was profitable if followed, but I could not make myself follow the method, even though it was tested daily, with stats and results (from a static chart) and I believed in it. Then why could I not execute as per my plan? As we all know, and you are experiencing, the psychology of trading is key to success. I feel like I have been gifted with more understanding now after my sessions.

On a different note, concerning your # of contracts traded and daily goals.....I understand traders have many different methods and risk tolerance and approaches to these issues. In my opinion, 5 MNQ on a $2000 account is WAY over-leveraged. I try to determine my leverage by starting with the idea that I don't want to risk more than 1% of my capital on any single trade. So, how wide is my normal stop in pints and dollars, and what starting capital makes that stop amount 1%? You may use different numbers, of course....this is just me.

On the daily goal issue, I think it is very normal for many of us to set a daily goal. However, the market is gonna give you what it gives you, and when you hit that day that the movement doesn't fit your trading style/plan, and you are focused on trying to get a certain dollar amount, it can be deadly. I have found it far more useful to focus on executing and managing my trades as flawlessly as possible. I know from testing that my plan will produce $ if it is executed and managed according to plan. So then, that is my real goal....trade the plan and count the money later.

All the best!

dredmond19800 

This sounds absolutely ridiculous when I type it out, but is it possible that by trading micros I am shooting myself in the foot as I should be moving on to minis to achieve the daily profit targets I have as a goal? The reason I ask is that on Fri I had an A+ trade with MNQ that netted me $230, which I should then have walked away with but I wanted to trade again to get another few hundred. My very real fear (and likliehood) is that by changing to minis I won't blow $1500 on Friday like I did, but more like $15,000.

I think this (the $15,000 loss possibility) is quite likely. I also think it is very likely that your trading changes as the money involved changes. If you can do A+ trades, then, if you consistently do them, you can make just about as much as you want to, just a matter of time. But in this case, you had a good trade, didn't like the money, and that changed how you traded, "to get another few hundred." (If you have a trading plan that basically says, "Go a little nuts if the money isn't enough," then you followed that plan. )

It is hard advice to tell someone not to let their profit/loss and their expectations of P/L influence how they trade, but it is good advice. For instance, you have trouble not just letting your stop get hit to take you out -- that's an example. The reality of a loss is not something you are willing to take, so you change your "plan" so that you try to ride it out. Objectively, you know that sometimes that works, and sometimes you blow up the account, but in the moment you are not all that objective, and you hope that it will turn around.

That is a case of starting out with one plan (or more generally, one understanding of trading) and then throwing it out when the money isn't working. Your plan needs to have the simple fact that sometimes the money won't happen, and then you walk away from the trade. Sometimes it will turn around anyway, sometimes it won't. But it's a better idea to get it figured out in advance what you will do (for instance, let the stop take you out like it's supposed to) and then follow it mechanically, unthinkingly, not revising anything on the spur of the moment (when, realistically, there will be serious mental pressure to not lose). And just do what you have previously decided you would do in that situation.

If it sounds like I'm lecturing you from the standpoint of someone who has always done everything right, I'm not. I know from experience that I am at my least rational while in a losing trade. So I don't rely on my judgment then, I just do what the plan says. If the plan's no good, which happens, then review and change it later, not while in the trade or while you're still at risk. Your snap judgment will almost always steer you wrong in these losing situations.

This thing about letting the money change how you trade, and changing things on the fly because of the money, is something we read about all the time from traders in the forum. It's something we all do at some time, and it's probably the biggest single cause of losing large amounts of money.

Good luck.

Bob.

COoneguy 

On a different note, concerning your # of contracts traded and daily goals.....I understand traders have many different methods and risk tolerance and approaches to these issues. In my opinion, 5 MNQ on a $2000 account is WAY over-leveraged. I try to determine my leverage by starting with the idea that I don't want to risk more than 1% of my capital on any single trade. So, how wide is my normal stop in pints and dollars, and what starting capital makes that stop amount 1%? You may use different numbers, of course....this is just me.

It's so hard to find the right balance of contracts vs capital for me. With my low balance account, I have the mentality it's 'play' money because if I lost $2k then it's not going to impact the home finances at all. I tend to then over-leverage as I'm attempting to build up the account balance quickly but inevitable I over commit to a trade and it's blown because of over leveraging.

You are right in that I need to rethink risk to % of capital to trade with.

COoneguy 

On the daily goal issue, I think it is very normal for many of us to set a daily goal. However, the market is gonna give you what it gives you, and when you hit that day that the movement doesn't fit your trading style/plan, and you are focused on trying to get a certain dollar amount, it can be deadly. I have found it far more useful to focus on executing and managing my trades as flawlessly as possible. I know from testing that my plan will produce $ if it is executed and managed according to plan. So then, that is my real goal....trade the plan and count the money later.

Absolutely agree with you - some days I won't even trade, others I will make 4-5pts and other days I will get a good run on a trade and keep adding to it and they end up being great trades. The more I think about my history, the more it seems obvious that after an A+ trading day, I end up thinking that's the new "normal" and strive to achieve it the next day. When I was content with 4-5pts, suddenly I get 12-15pts and the next day try and get that again only to see the account blow up.