Looking for Advice

Discussion in 'Trading' started by rarefarefroghorn, Oct 30, 2021.

  1. Background:
    I have traded on and off for four years. This October makes it literally the 4th year. I am a losing trader. Was always in the phase of break even in 3.5 years but this past 0.5 years I made explosive gains followed a significant loss in capital putting me in the red. I have never recovered financially from this loss.

    Trading Style:
    The way I trade is based on price. My theory is self taught although bits and pieces may have been taken by different information I have taken. I trade naked charts except for price levels, this means no trend lines or volume. I just trade price, the only variable I assumed to be significant. I will step you through my daily process.
    I trade only SPY options. Meaning I buy calls/puts.
    • I go from Daily -> 1 Hour -> 5m looking for areas of importance. Essentially making a price ladder of certain spots to trade.
    • Already in the back of my head because I have been consistently trading I am aware of the phase of the markets. I learned to trade the V of the spy drops. Essentially on the way down and on the way up but intraday(From writing this I can see sometimes I made bad trades now that I look back by trading periods that are not within the V).
    • When market opens price should be between two important levels. If not in the case of a gapup, I fail to understand where to trade.
    • Let us assume the market is in the phase of dropping. Signs of this are attempts to go higher failing multiple times. Someone wants out, and this in effect causes others who ware wanted to sell to test the limits of the other sellers. They will essentially wait if price can go higher, if someone is selling at a certain price and I also need to sell, I do not know his size, therefore I wait to see how much he is willing to sell. If he keeps selling and starts dropping the price, which he does not want because it will lose him profits. This shows he knows someone else is willing to sell, or that from my perspective someone else not just the guy is selling. Meaning there are 3 sellers in total. Me, the guy I was testing, and a third. The more people who want to sell the more dramatic the drops will be, essentially leading to a inflection point where selling besets selling. This is the way I trade. I will get in on a range betting on breaking out or breaking down and trying to get the best price to ride the wave. In so getting the best price I also reduce my risk of losses if price breaks against my bet.
    But I fail to do so. I do not follow my plan. Reducing risk is well but overtrading leads to losses, and losses lead to more losses for me. Maybe it is the environment, maybe it is that I need to prove myself. I don't know but I always seem to destroy my gains and some more. I increase my size, I hope instead of selling for a small loss.

    All these actions seem to point to me wanting to be right. I know to be a trader one has to be willing to accept his losses. I think, I have all my hopes riding on trading. I am still in university and I am not doing well mentally. I trade for my ego not for profits, and I think that is what is killing me. I feel frustrated because in a lot of my trades I make good calls on tops and bottoms and it feels great. I just can't seem to stay disciplined. My environment has changed, I have also changed in doing so. Maybe I just need a break. I started trading 1k in my college apartments, over the past 4 weeks I made $270 on trading on only a size of 1 options contract. Then I made a mistake. I was up $60 on one contract, and I never sold. I watched the gains disappear and I lost and extra $30. This began the journey of me losing my capital throughout the next few days. Eventually leading to me being down 300 from my initial 1k.

    I would appreciate any advice. I do want to be a trader and I know it is possible, I have no doubts. But I feel like I have been in this cycle for way to long. Maybe it is my system it might have never had a positive expected value I don't know how to test this. The fact is I know I make mistakes and I can't keep myself from doing so. I try to prevent it, but I am human. I have thought of ways to prevent this. I take breaks after exiting 1 trade. I read my plan before the market open. I always make mistakes.

    I just can't seem to grasp onto this dream.


    P.S. I currently do not trade. I am focusing on school.
  2. I believe I'm qualified to answer this post. I will help you, for free, but this message can be harsh to you, please don't take it personally.

    I think you have neither a plan in the first place, nor a winning system. Have you backtested this idea? How does it perform?

    A system without backtesting results is a system destined to lose, because you wouldn't even have a grasp on its statistical volatility.

    1-) Focus all your energy into discovering a winning system, it doesn't matter how long it takes, just focus on it. You gotta backtest it throughly. How you do you do it? You need to either use a ready to use backtester, or you need to code your own backtester. I've chosen the second option.

    If you don't know any math, learning a little statistics is all you need, I don't think you need complex math models to make money. You can, but that'd be overkill.

    You don't know how to code? Learn it. You don't have to do algo trade, you can even trade manually if you want, but you need to have a system scanning for possible signals. Without it, you are driving blind.

    2-) Start trading.

    I hope you make it.
    longandshort and Leob like this.
  3. kmiklas


    Honestly it looks like you're gambling.

    Nothing in your description gives you any real edge over the next trader.

    It's one big 50/50. Flip a coin.
    twstn, formikatrading and LuckyMac like this.
  4. MrMuppet


    Stop trading right away. You neither have the capital nor the knowledge to get anywhere in this field.
    Even worse, your addiction to make it may lead to neglecting the stuff that is more important in your life right now, especially education.

    If you really want to pursue this carreer, make sure you get properly educated in math and IT, then apply for a intern or trainee position to see, what you're actually up against.

    As retail with below 50k in savings there is zero chance you'll make a living from this, got that?

    You bet on what you believe gives you an edge, but in reality you have no clue how the market works neither do you have a grip on basic options concepts. You just trade them because you can't afford outrights.

    Just stop, get educated and come back later. Right now you're just burning out.
  5. Good post for you to do. There are two possible cases:

    1) Assume your strategy is viable, then your manual trading is the weak link. Fix that with automation. It is not so much about "showing more discipline" but that it is not sustainable, and when it is off , it compounds. Sure you can show "grit" and just get better discipline and become a "super disciplined" trader. But the solution is to get automation to do the heavy lifting that causes all the "tilt" influences. No one builds houses with a hammer and chisel anymore. They use power tools, premade trusses etc.

    Assume your strategy is NOT viable, but you made money before because you did NOT follow it and through sheer effort, you made money. This means your tactics are actually pretty good, sometimes. But again it is not sustainable. Encode those into automation. Then get a good strategy.

    In summary there are two* things that need to be good: The strategy (signals) and the execution (trade tactics). Don't prop one up with the other. A lot of traders go in circles doing this. Get both reasonable good and sustainable. Sustainable and consistent execution are two keys to trading longevity.

    * Of course risk management (portfolio protection) wraps around all this, and hence your post.
    Nobert and Leob like this.
  6. MrMuppet


    honestly, perhaps you've just read half of his post. He's a college student trading a 1k account. There is no way on earth anything comes out of that unless he gambles on a shitcoin and hits the jackpot. Completely underfunded
  7. As others have noted, you’re trading randomly, which even at 50% is a losing game because you still are paying the bid/ask spread.

    My advice:
    - quit trading for now, focus on unlearning what you’ve taught yourself
    - start reading about financial markets from a professionals perspective (efficient market hypothesis, assumption of no arbitrage and no trading frictions)
    - learn the tools that will help you analyze markets (data analysis and econometrics, focusing on testing causality)
    - try to get a job in the industry to learn from actual practitioners
    - figure out if you are more qualitative or quantitative in your approach and stitch together a process that builds off it
    - try to trade again

    Good luck.
    Nobert and benten like this.
  8. JSOP


    Options also have a time value aspect which does not seem to be taken into account in your trading. Even though you might be correct on the price action, but if the magnitude of the price move is not large enough to compensate for the price of the option, you will still lose. And also the volume of SPY and the volume of the option are two different things. The volume of SPY might indicate a price move in one direction but it might not indicate necessarily the price move of its options which has its own supply/demand structure.

    Not only you should learn more about PA in trading but you should also learn more about options. There is still a lot of learning to be done here before you trade live. If I were you, I would start by demo trading to formulate a trading plan, backtest it and demo trade it to make sure it's consistently profitable and then start small in trading live.
  9. padutrader


    i lost money for 14 years.
    I had studied everything....... over 40 books...until i found Al Brooks......

    it took me 14 years to understand him: i stuck with him trough all the losses because i instinctly felt he was special and i was right.

    i started trading in 1994, found Brooks in 2007 ..... so i had seen enough of the trading education world by then to know that Brooks was different .

    Today i feel BROOKS IS A TOTAL GENIUS AND HIS KNOWLEDGE about trading is probably more than the knowledge of all the traders in ET.

    of course he does not declare his trading statements. But he gives so much knowledge free or for a pittance so why should he try to convince anyone to listen to him!!!!

    why should he bother.

    no one goes around declaring their income hung around their neck

    he has a lot of free time since he only needs 10 seconds to look a a chart and know what to do and he teaches others how to do that.

    He is my hero and i am not ashamed to say this.

    But it takes persistence to reach his level.........

    ten years or more may seem a long time but i can tell you it is well worth it
  10. Overnight


    There was a thread here today you mentioned that Brooks does not provide any guidance, only theories?
    #10     Oct 31, 2021