Wednesday, November 14, 2007

The Problem is Me

It's not the market nor the model, the problem is me. I just suffered my second worst loss per contract since I started trading futures. The model started the day short but predicted there could be a bounce. I got long the bounce for a while - this first trade was good. Then I switched to short. I knew there was a potential for the model to reverse if there was a strong enough rally. But a rally of that size seemed unlikely. Looks like we got it. I stayed short. Missed the opportunities to get out with reduced losses and then finally gave up. No stop and no discipline. I haven't destroyed all the profits I made earlier in my Interactive Brokers account, but I am getting there. Three bad undisciplined losses this month and this is the worst by far. The model is making money this month. There is no reason why I should be losing. I'm not sure what to do. Do I keep trading and try to stick to the discipline? Stop trading? Paper trade? I really don't know.

3 comments:

Rafi said...

If you believe in your model then you need to believe in it for real and follow it to the bitter(?) end.

If you're not that certain then trade in simulation until you get your confidence up that you could have made loads of money following the model and what a shame you weren't trading for real.... and jump in.

enoughwealth@yahoo.com said...

You might be trying to hard rather than getting 'in the zone'. Perhaps just change your focus from trying to make a profitable trade to just making a trade that is do 'correctly' -ie. with a plan, per the model, with written stops and stick to them...

I know that when I do target shooting I score best when everything is happening automatically as it should (in the 'zone'), and if I think about the score I'll start to shoot worse. When you're performing badly just go back to the basics and make sure you're doing them correctly.

ps. You've probably put a lot of pressure on yourself to 'perform' now that this is your full-time job. Psychologically it was probably easier to be dispassionate about your trading when you had a 'real' job and were trading on the side. If you keep having problems trading you could do some of the contract work you previously mentioned and resume trading as a part-time activity.

mOOm said...

Enoughwealth - you are absolutely right. I saw possible trades last night and this morning that would have worked out, but didn't take them due to my recent loss - by the time I get around to making a trade again after a big loss I'm "out of the zone" and market conditions are changing. I'm not getting out of the bad trades due to loss aversion - not willing to take a small loss - and wanting to be right - I get into some kind of trance too which Brett Steenbarger talked about where I know I am breaking the rules but don't snap out of it and close the trade. Yes, if I am trading "fulltime" and am losing money I really feel like a loser. Whereas when I was teaching, it was bad to lose money but at least I was being productive elsewhere.