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Hi all! I've been trading futures for approx 3 1/2yrs I am struggling with placing and keeping a stop, loss limits (daily/weekly) and not averaging into losers.
It has become a dangerous habit that I add to losers (I also add to winners) and 99/100 times the position will come back to break even or my original trade hypothesis holds up. However, that 1/100 is an account killer and I am just not able to break the habit. Fortunately, my account size has been kept small on purpose (~$2k) despite a large amount of capital I have available because I know this habit is my Achilles heel and is my undoing - throwing $10/20/50k into my account will result in that money disappearing until I fix this issue.
AMP (my broker) will close positions if you exceed 80% loss in a day, which happened again this morning and for the 2nd time in a row (when they've done this) the position was closed ~3-5pts (MNQ) before the market reversed and came into my favor.
I know I should have killed todays trade earlier but as I sit here writing this I am justifying my trading behavior by saying I was undercapitalized and if I could withstand the extra drawdown of about $200, I would have not alone gone back to my break even but also hit my original TP. This is ridiculous thinking as in one of my runs early this year I did $2k -> $9k and still managed to blow it in a single trade.
All the books, YT videos, articles and advice tell me to set the order up with a TP & SL and walk away but I cannot do it no matter how much I will myself to stick to a plan.
How do you seasoned traders overcome this problem?
The following 2 users say Thank You to dredmond19800 for this post:
MANY years ago. (more than most of you are in age), I had that issue.
I was trading the stock AT HOME. I just KNEW it was going to the moon.
I purchased it at $53 a share. And I waited for the profits to roll in.
On day one it went to $55 a share and then to $56.
Then it started a retrace. I watched my profits go away quickly.
The pain was too great at $40 a share so I sold but I decided to give myself a reminder.
I left 25 shares in my account.
EVERY morning I opened my trading module and there was my reminder.
It finally went bankrupt and shares to ZERO.
BUT it was worth the cost because I don't hold losers any longer and it has saved me tons of money.
(P.S. I NEVER add to a losing trade. If it is going my way, I may ADD to a winner but never 'cost average' to a losing trade.)
I had also watched videos, gone to seminars, read things about how to not hold losers but none of that worked.
THIS DID.
I can still see my $$ dropping every day from the error of holding a loser.
Rejoice in the Thunderstorms of Life . . .
Knowing it's not about Clouds or Wind. . .
But Learning to Dance in the Rain ! ! !
The following 6 users say Thank You to DavidHP for this post:
Thanks for your insights. I have a tendency to take a break after a huge loss, collect my thoughts, start trading and sticking to my rules and then after a few weeks I'm back to my old habits again - frustrating!
Perhaps I need to print out my MTD P&L graph and stick it on the wall to reinforce why stops need to be adhered to.
The following user says Thank You to dredmond19800 for this post:
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!
The following 6 users say Thank You to ZviTradingCoach for this post:
does goldman sacs or warren buffet use stops ? no ! why ? #1 Leverage .. they do not use it # 2 the reason they bought the stock.. they use fundamental analysis . # 3 they do not use Technical Analysis for the most part .. its laging and late . # 4 MONEY MANAGEMENT .. .. they build a position over time , starting with a child s plate compared to their account size . # 5 they do their own research ... there not setting in a trade room or reading a news letter . may be we should start learning from them , so we to are not using stops . just thinking outside the box . hope it helps .
If you have this problem trading futures, then stop trading outrights and start two-legged pairs and three-legged butterflies. There are literally hundreds of combinations available where you can create a synthetic instrument that mean-reverts, thereby eliminating the need for using stop-losses.
With these types of trades, it's all about entry levels and dollar-cost averaging.
Many traders shun pairs trading. For some it is a career-saver.
If you are married tell your wife the plan, where your stop is then have to explain why you missed it will usually work.
Even if you are not married, have a friend, or better yet someone you don't like, hold a hundred dollar bill. If you miss your stop they get to keep it.
You know the problem and only you can fix it.
"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
This is spot-on, and having this explained to me, being aware of it, and working on a solution has made an enormous difference to my growth as a trader.
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 you place a stop and move it or cancel it then trading isn't for you. It's that simple if you aren't disciplined then stop trading....period
Unfortunately you will use the biggest trading stop of all at some point which is losing your trading capital and you will then be Stopped out for from the trading game.
I am always seeing people write about how do I stop bad behavior or self sabotage and it's interpersonal. If you enjoy the risk and losing then don't stop.
The following user says Thank You to HiLatencyTRDR HLT for this post:
