Day trading frustration

[u0362565]

Hi all,

I'm getting frustrated with my own psychology and don't know what to do.  I've found that on many trades i had the opportunity to take what i would call reasonable profit (often more than i would make in my day job per day) on a single trade. But instead of taking it or moving the stop up to follow it i leave it open because i think the market will keep going my way. And perhaps more to the point if i take the profit when i have it, it breaks from my risk reward ratio.  But the thing is, i can't stand risk/reward because profit isn't a fixed quantity so shouldn't you just take profit when you have it and as soon as the market looks to be turning run? Instead i've left the trade to play out i.e. it hits the limit or it hits the stop and inevitably fail at that point and end up with a loss.  That just equates to total loss whereas at least if i take profit perhaps my profits will be more than my losses.. 

Thanks for the advice! P.s. this has led me to look at longer term trading over days weeks instead but i think my psychology issue will still present itself whatever

 

 

[Caseynotes]

18 minutes ago, u0362565 said:

Hi all,

I'm getting frustrated with my own psychology and don't know what to do.  I've found that on many trades i had the opportunity to take what i would call reasonable profit (often more than i would make in my day job per day) on a single trade. But instead of taking it or moving the stop up to follow it i leave it open because i think the market will keep going my way. And perhaps more to the point if i take the profit when i have it, it breaks from my risk reward ratio.  But the thing is, i can't stand risk/reward because profit isn't a fixed quantity so shouldn't you just take profit when you have it and as soon as the market looks to be turning run? Instead i've left the trade to play out i.e. it hits the limit or it hits the stop and inevitably fail at that point and end up with a loss.  That just equates to total loss whereas at least if i take profit perhaps my profits will be more than my losses.. 

Thanks for the advice! P.s. this has led me to look at longer term trading over days weeks instead but i think my psychology issue will still present itself whatever

 

 

the way to fix that is to put profit targets in with the entry and then leave it alone.

so you want a bracket order with entry, stop or trailing stop, and target, target based on RR ratio or chart structure.

the above problem is exactly where the saying 'both bears and bulls can make money but pigs get slaughtered' comes from.

also journal your trades so you know exactly what is actually happening rather than relying on memory.

[u0362565]

7 minutes ago, Caseynotes said:

the way to fix that is to put profit targets in with the entry and then leave it alone.

so you want a bracket order with entry, stop or trailing stop, and target, target based on RR ratio or chart structure.

the above problem is exactly where the saying 'both bears and bulls can make money but pigs get slaughtered' comes from.

also journal your trades so you know exactly what is actually happening rather than relying on memory.

So by profit target you mean a limit? Or if you get past some mental profit target move the stop to it to lock it in?  I think the stop is more important that the limit because no one can say how far the market will move.  I have considered manually moving the stop up as the profit increases-i haven't tried trailingstops because i feel like its not flexible enough and never know what to make the step size given when its trailing the market has to move by the step before the stop moves by that amount-just can't get my head around how to set it so think manual is easier but then its subject to bias.. Thanks

[dmedin]

1 hour ago, u0362565 said:

shouldn't you just take profit when you have it and as soon as the market looks to be turning run?

No.  

[Kodiak]

Remind me of this thread in another place

https://www.elitetrader.com/et/threads/stop-losses-are-killing-me.346976/

[MissClaire]

If it's in profit and you feel the urge to take the profit, take it, it wont harm anyone.

[nit2wynit]

No, you can't take less than your risk.  You need to make sure your PL ratio is 1:1 and 50% win rate just to stay in the game.

Lets say you place 10 trades.  6 of them are winners,  but you initially risk 2:1 not 1:2.  and 4 of your 10 trades fail.  60% success rate is pretty good, if your PL is also good.

6 wins in a row and you're doing great.  Let's say you risked £20 on each trade, but only took £10 on 6 of them.  Great, you're up £60, but you actually risked £120.  Now assume you're having a bad day and that 6 wins becomes a 6 streak Loss.  Now you're down £120 but only had the opportunity to make £60 or less coz you wanted to take the profit.  Those are bad numbers!

I've only been trading about 18 months.  I used to report great Wins on the Demo.  I'd do exactly what you're doing.  I'd win 80% of my trades, but only because I was taking too little profit too soon.   I'd let the last 2 losers run and run too far and wipe myself out.   Then I started limiting my loss and aim for 1:2.  I'd practice with a 2k account size and it was great.  I thought I'd nailed it, till i went Live and the money was real.  I lost my nerve and my account.   

However, I've gone the other way now like you.  I can often make a minimum of 1:2, and almost as often 1:4, but I always hold out for more till it comes back to Break Even.   Typically I can place 10 trades, win 7 of them, but not take profit even at 1:1, only for them to come back down to Break Even or a loss.  Then in frustration I'd let the last 2 or 3 run to a loss.   It's statistically probable that I'll lose based upon my own failed psychology.  My main problem is I think every trade is going up and up and up and I've now realised....they don't.   The psychology is real, but so is the discipline required.

Analyse 20 trades.  See how many you got right at the very smallest risk amount or price per point.  See how far they went and how far they pulled back.  If you get the direction right at least 50% of the time, then you need to play 1:1 PL just to stay in the game.   If your trades had potential to move greater than 1:1 then even better.  Personally I find that most Day Trades will only go 1:2 or 1:3 at best.  The ones that go 1:3 1:4 or more become less and less frequent.  However, it's important to Not move your Stop to BE too soon.  I've lost as many trades as I've won doing this.  If we can't handle the Fear of Loss, then it needs to be mastered most of all.

Most importantly I believe a trade should work right away.  Especially in Day Trading.  Day Trading requires tighter stops and a shorter game.  Hoping for a 20% move on a stock that only moves 5% per day on average is a bit of a long shot.

Good fortune to you.

[DavyJones]

I have finally got over that psychology issue. I never move stops now except  the odd time in the direction of the trade, to lock in profits (BE). I never risk more that 0.5% on a trade and keep risk /reward to about   1:1.5

I have read a heck of a lot now and follow accepted advice. 20 trades , same strategy , sensible stop say at 1 - 1.5  ATR / 1 BB  or a obvious support and resistance line

I don't revenge trade, never get over confident ,screenshot every trade  and keep a detailed log and analyse every trade with notes. 

*** HOWEVER The problem is quite simple,   its just not working, I am on a 5th loss in a row on MACD and 200MA , trading in the direction of the trend, using multiple time frames  

 

3 hours ago, nit2wynit said:

Personally I find that most Day Trades will only go 1:2 or 1:3 at best.  The ones that go 1:3 1:4 or more become less and less frequent.  However, it's important to Not move your Stop to BE too soon.  I've lost as many trades as I've won doing this.  If we can't handle the Fear of Loss, then it needs to be mastered most of all.

Most importantly I believe a trade should work right away.  Especially in Day Trading.  Day Trading requires tighter stops and a shorter game.  Hoping for a 20% move on a stock that only moves 5% per day on average is a bit of a long shot.

 

looking at my logs I tend to agree with this now. I get the initial direction right more that 50% of the time but once i passes the 1:1 , the odds decline rapidly

I would only move a stop if the trade moved rapidly, Like a manual trailing stop.  

[chil10]

The price of any stock or asset has a mean (avg) over time.  You need to consider taking profit when prices is at 1 or 2 standard deviations from the mean. At 1 standard dev. price will revert back to the mean 66% of the time.  At 2 standard dev. price will revert back to the mean 95% of the time.  It is a very easy concept you can learn in 5 min

Similar, many traders use the Fibonacci sequence sounds complicated, but very easy to understand.

Understanding these basics will help your timing in entering & exiting trades.

Because so many traders do this, it is somewhat of a self fulfilling prophecy.  

Edited July 15, 2020 by chil10

[Caseynotes]

1 hour ago, DavyJones said:

I have finally got over that psychology issue. I never move stops now except  the odd time in the direction of the trade, to lock in profits (BE). I never risk more that 0.5% on a trade and keep risk /reward to about   1:1.5

I have read a heck of a lot now and follow accepted advice. 20 trades , same strategy , sensible stop say at 1 - 1.5  ATR / 1 BB  or a obvious support and resistance line

I don't revenge trade, never get over confident ,screenshot every trade  and keep a detailed log and analyse every trade with notes. 

good points and sound advice for others to take note.

with regards to the actual stop loss only testing will give the answer. yes getting the direction right is easier than timing the entry and setting the profit target, some markets lend themselves better to chart structure targets than a R ratio. In a trend and pullback the first target after entry has to be the prior swing high (up trend) which some call the 'first trouble area' and is often around 2 x the stop placed just behind the base of the pullback. If sellers are serious this is where they will strike a second time to force a reversal.

[DavyJones]

2 minutes ago, Caseynotes said:

good points and sound advice for others to take note.

with regards to the actual stop loss only testing will give the answer. yes getting the direction right is easier than timing the entry and setting the profit target, some markets lend themselves better to chart structure targets than a R ratio. In a trend and pullback the first target after entry has to be the prior swing high (up trend) which some call the 'first trouble area' and is often around 2 x the stop placed just behind the base of the pullback. If sellers are serious this is where they will strike a second time to force a reversal.

cheers. 

Issue is that there are so many moving variables its hard to analysis properly, Seems like you need a hundred trades on the same stock / indices etc   

I did a long trade on FTSE Cash yesterday 15min / 1 hour time frame. Rising MACD, Rising 200Ma, rising 20ma 20MA  broke  through 200ma 4 periods prior and continued on fro the rest of the day. Prior swing low was far too low for a sensible stop so I set it at below 20ma. It broke through the 200ma though. 

Whether this is a good Strategy or not for FTSE 100 I don't know

[Caseynotes]

9 minutes ago, DavyJones said:

Prior swing low was far too low for a sensible stop so I set it at below 20ma. It broke through the 200ma though. 

yes stops are a different story, though I might use prior swing levels for targets I prefer stops to be closer to the entry but appreciate their are many schools of thought. Some like very wide stops because getting direction right is easier than getting the exact entry place right so a wide stop provides leeway. I prefer to just get out early if price turns against and just keep looking, sometimes it takes a couple of bites before getting it right.

Probably depends on how much time you have to keep watching the chart.

[THT]

This is why I say manually back test your method over 100 trades - that way you will know a) if the method works b) the win rate and c) the average pts/% move of the method

Then you can set your money management appropriately

The method you are trading will determine the possible R profit value - As Nit2wynit says above if you're looking for a 20% move and the market only offers 5% then you've got to alter things to take the 5%

I'm thinking of publishing a totally random trading method for 12 months to show how just guessing can make money - I need to decide whether it's worth the hassle and time factor doing it though

Anyway - All my methods I use have the following money management rules without fail and i know these rules are going to apply before i even place the trade:

• Once up XR stop gets moved to break-even
• Protect 50% of open profits at all times until either stopped out or target hit
• Then when within XR of profit target, trailing stop gets tightened to a trailing 1-2 bar H/L (depends on price action)

If you start taking multiple profit targets you'll dilute the overall R profit value and on a system/method that works 50+% of the time that's likely to be 1-3R

It would most likely be better if you traded 2-3 units rather than just 1 - if you're taking profit targets along the way - so if you normally risk 1% of account risk 3% and have 3 target levels etc - it will all depend on the maths and average % move you're method actually works to

That's why I published my How to Win thread - it covers everything you've mentioned in this thread and how to deal with it - that was the purpose of the thread, how to deal with what trading throws at you.

 

[u0362565]

Thanks for all the advice, I find it kind of amusing that there are thousands/millions of people all battling in trading.  Its the weirdest thing i've ever come across, people are funny too, they want to be good at things naturally and can you be "good" at trading, I guess those who are consistently profitable are but its really about statistics, it must be the hardest way to make money-yet from the outside looking in it lures you into a false sense of security that its easy ha ha. I've learnt my lesson.  I really think there should be more regulation on retail trading, just saying blah % of accounts lose money does not deter people enough until they lose the money themselves. Sorry this has become not about stop losses!

[Caseynotes]

45 minutes ago, u0362565 said:

I really think there should be more regulation on retail trading

the regulators just bought in a whole new raft of regulations (Jan 2018) that only just stopped short of an outright ban on sb/cfd trading for retail clients.

Client needs to take more responsibility and learn to differentiate between basic gambling and trading. The key is in the journaling and testing, without data to back your plan you are really just guessing.

I'm reminded reading years ago on all the testing that is done on a new indicator to determine the best default settings, most have 2 or 3 adjustments so the computer runs needed counted in their thousands to show finally which settings were optimal.

By the way the runs were mostly all done on one single time frame to keep the number of runs needed down to a realistic figure and that time frame was nearly always the daily. So if not using the daily chart you might find playing with the default settings can fine tune the indicator to better suit the time frame you are using.

[DavyJones]

41 minutes ago, Caseynotes said:

I'm reminded reading years ago on all the testing that is done on a new indicator to determine the best default settings, most have 2 or 3 adjustments so the computer runs needed counted in their thousands to show finally which settings were optimal.

Plenty of user scripts on ProRealTime for this type of testing, might be useful for anyone interested 

 

Edited July 15, 2020 by DavyJones

[u0362565]

1 hour ago, Caseynotes said:

the regulators just bought in a whole new raft of regulations (Jan 2018) that only just stopped short of an outright ban on sb/cfd trading for retail clients.

Client needs to take more responsibility and learn to differentiate between basic gambling and trading. The key is in the journaling and testing, without data to back your plan you are really just guessing.

I'm reminded reading years ago on all the testing that is done on a new indicator to determine the best default settings, most have 2 or 3 adjustments so the computer runs needed counted in their thousands to show finally which settings were optimal.

By the way the runs were mostly all done on one single time frame to keep the number of runs needed down to a realistic figure and that time frame was nearly always the daily. So if not using the daily chart you might find playing with the default settings can fine tune the indicator to better suit the time frame you are using.

Interesting, i'm not sure what the answer is but its perhaps telling that SB's aren't taxed because the tax man clearly knows most won't actually make any money anyway.  I just went back to demo, and took the rest of my live account with me and of course i'm making some money again Ahhhhhhhh! Stick with demo stick with demo.. if this is consistently profitable i guess i know my issue is the pychology of real money.

[Caseynotes]

4 minutes ago, u0362565 said:

Interesting, i'm not sure what the answer is but its perhaps telling that SB's aren't taxed because the tax man clearly knows most won't actually make any money anyway.  I just went back to demo, and took the rest of my live account with me and of course i'm making some money again Ahhhhhhhh! Stick with demo stick with demo.. if this is consistently profitable i guess i know my issue is the pychology of real money.

Psychology is always the problem but can be overcome but not on demo, demo entrenches bad habits because there are just no real consequences.

best is to start on the mt4 platform at 10 pence a point so can't do too much damage and look to steadily increase size as your trading improves so it's a natural progressive process instead of leaps into uncertainty.

[u0362565]

14 minutes ago, Caseynotes said:

Psychology is always the problem but can be overcome but not on demo, demo entrenches bad habits because there are just no real consequences.

best is to start on the mt4 platform at 10 pence a point so can't do too much damage and look to steadily increase size as your trading improves so it's a natural progressive process instead of leaps into uncertainty.

I had considered that approach but the problem for me is that trading small sizes psychology wise is like trading demo so my mind doesn't take it as seriously as when the sizes are bigger, so for example i'm much more likely to put a wider perhaps more realistic stop on a low bet size vs something that could lose me a lot if it goes belly up and hence that's part of the problem.  But generally i think you're right small sizes, build up and hope your psychology evolves with the size.

[Caseynotes]

2 minutes ago, u0362565 said:

I had considered that approach but the problem for me is that trading small sizes psychology wise is like trading demo so my mind doesn't take it as seriously as when the sizes are bigger, so for example i'm much more likely to put a wider perhaps more realistic stop on a low bet size vs something that could lose me a lot if it goes belly up and hence that's part of the problem.  But generally i think you're right small sizes, build up and hope your psychology evolves with the size.

the thing is it's not necessarily the damage from each trade but to the account over time, those £1 -£5 losses each trade add up, your account moving steadily towards zero really sharpens the mind and you really start to concentrate on what should have been priority number 1 from the start, conserve capital. Demo teaches you to just auto refund the account and carry on as was. 

[nit2wynit]

30 minutes ago, u0362565 said:

Interesting, i'm not sure what the answer is but its perhaps telling that SB's aren't taxed because the tax man clearly knows most won't actually make any money anyway.  I just went back to demo, and took the rest of my live account with me and of course i'm making some money again Ahhhhhhhh! Stick with demo stick with demo.. if this is consistently profitable i guess i know my issue is the pychology of real money.

Yes, the demo will show you the technical side of winning and losing, but not the Achilles heel of psychological loss; it's a downward trend to use a pun.

Stay away from the demo.  Bet low and often but make sure you're sure of where it's going when you're getting in and when you're getting out.  It's important to remember that Losing is essential to psychological learning.  We must risk and lose and accept before we can trade with confidence.

Day Trading is a smaller time frame.  In and out in minutes on small moves.  The problem with SB and Day Trading is the small moves can often be the Spread so getting in and out is almost impossible.  However, the benefit is of course, it's Tax Free.  What this means is we must get out sooner than you would than if you were actually Buying and Selling shares.   It's the Spread that is creating the issue with Day Trading and Spread Betting, especially when we're talking about Scalping.  It means we need to take extra care on choosing our trades.  They need to be able to run longer and wider to cover the spread OR we simply need to realise we must accept a lesser profit and adjust our PL ratio.  If a trade moves 10pts or 10% or whatever, but the spread is 7pt, then we're not going to make much on it unless we're in very early and exit as late as possible, thus being longer in the trade allows for more chance of it reversing.

 

[nit2wynit]

22 minutes ago, u0362565 said:

I had considered that approach but the problem for me is that trading small sizes psychology wise is like trading demo so my mind doesn't take it as seriously as when the sizes are bigger, so for example i'm much more likely to put a wider perhaps more realistic stop on a low bet size vs something that could lose me a lot if it goes belly up and hence that's part of the problem.  But generally i think you're right small sizes, build up and hope your psychology evolves with the size.

If you're changing Stop and Limit based upon account size then you're arguing with your own strategy.

It's important to know what strategy you're applying to a trade before money even comes in to it.

If a Day Trade Gap and Go has the potential to make 10% ore more but you allow a larger Stop because of a smaller account then you're changing the statistical narrative of the trade.  A Gap and Go will go up then often Retrace, then go again half way at the end of the day.  If you move your Stop lower, then it's very likely it's going to come right back down for a loss.

[u0362565]

15 minutes ago, Caseynotes said:

the thing is it's not necessarily the damage from each trade but to the account over time, those £1 -£5 losses each trade add up, your account moving steadily towards zero really sharpens the mind and you really start to concentrate on what should have been priority number 1 from the start, conserve capital. Demo teaches you to just auto refund the account and carry on as was. 

Point taken, but right now i've put a mental stop on losing any more money. I had a shot and it didn't work out i want to prove that technically something can work and in the mean time i can earn back some of what i lost through the day job.  I was constantly thinking its 50/50 i'll claw what i lost back but it wasn't happening and just got further away, then if you're not careful and you don't break from that mentality you could see it all gone, was concerned it was going to become an addiction and i'm sure it could.   I started too big and scared myself basically.  Given the climate right now, not the best time to throw some money away if 've got my sensible head on.

[nit2wynit]

As a strict rule now, my Stop is below the red candle on the pullback OR 1.5x the Spread size.  It cannot be dictated by an amount.  The amount is determined by the position on the chart and the risk will always be determined by Price movement SL and Pullback points.  This is also why it's important to trade stocks with small spread thus limiting risk amount.

[Caseynotes]

3 minutes ago, u0362565 said:

 I started too big and scared myself basically

that's how everyone starts and find out too late it's the wrong way round.

 

[nit2wynit]

4 minutes ago, u0362565 said:

Point taken, but right now i've put a mental stop on losing any more money. I had a shot and it didn't work out i want to prove that technically something can work and in the mean time i can earn back some of what i lost through the day job.  I was constantly thinking its 50/50 i'll claw what i lost back but it wasn't happening and just got further away, then if you're not careful and you don't break from that mentality you could see it all gone, was concerned it was going to become an addiction and i'm sure it could.   I started too big and scared myself basically.  Given the climate right now, not the best time to throw some money away if 've got my sensible head on.

I had a limit of £1400 last year.  as soon as I hit this I pulled my money out and went back to my notes.  All over my note book are the words in bold.

STOP BUYING THE RISE-BUY THE DIP, NOT THE RISE.  

Over and over I'd do the same thing.  Knowing what you've done is as valuable as knowing what to do.

Don't give up.  Losing is the first lesson.

[u0362565]

7 minutes ago, nit2wynit said:

If you're changing Stop and Limit based upon account size then you're arguing with your own strategy.

It's important to know what strategy you're applying to a trade before money even comes in to it.

If a Day Trade Gap and Go has the potential to make 10% ore more but you allow a larger Stop because of a smaller account then you're changing the statistical narrative of the trade.  A Gap and Go will go up then often Retrace, then go again half way at the end of the day.  If you move your Stop lower, then it's very likely it's going to come right back down for a loss.

Yeah got you, i think i though i was comfortable with the potential loss per trade but actually when thats several trades its really stacks up

2 minutes ago, Caseynotes said:

that's how everyone starts and find out too late it's the wrong way round.

 

I'm just glad i managed to put a mental stop on it now, the worry was i wasn't going to be able to stop

 

[u0362565]

2 minutes ago, nit2wynit said:

I had a limit of £1400 last year.  as soon as I hit this I pulled my money out and went back to my notes.  All over my note book are the words in bold.

STOP BUYING THE RISE-BUY THE DIP, NOT THE RISE.  

Over and over I'd do the same thing.  Knowing what you've done is as valuable as knowing what to do.

Don't give up.  Losing is the first lesson.

Everyone has to lose first and i'm sure that's what happens to 100% of people initially

 

[nit2wynit]

5 minutes ago, u0362565 said:

I'm just glad i managed to put a mental stop on it now, the worry was i wasn't going to be able to stop

 

I believe if you've managed to stop trading so you can re-evaluate, then you're already succeeding. 

This is page one.  Now onto page 2.  Dealing with Loss.

[nit2wynit]

Why not try this?

Last year I traded the FTSE.  It was at a Support Level and on News I was anticipating a rise.  I bet as small as I could.

If I'd simply gone Long with 1 trade, I'd have made a profit of £20, but what I actually did was an exercise in Timing.  Getting in and getting out; Anticipating Ups and Downs.  I placed about 20 Trades in total and made £50 instead of £20, but also gave back £16 on the way up; roughly 70% success.  So from point to point the Trade was worth £20, but I made £36 practicing.  It was exhausting, but I proved to myself I could read the chart in front of me.  How I actually came to blow my account was by trying to play a long game, with a short strategy.  then, like you. I quit.

I haven't given up, but I've invested instead.  Spread Betting may not be the way to go for Intra Day or Day Trading.  sure it can work, but it's difficult.