I don't hedge my positions with options, nor try to "generate income" with them. I use options as accelerators.
Yes, despite the strategies, analysis techniques and tools, Forex trading is always associated with risks and there will always be losing trades, and it is the competent management of these risks that allows you to avoid catastrophic losses and ensure the stability of profitability in the long term.
That is so true, but so hard to do. I am so much in the habit of "fixing" bad trades, that it is a daily struggle to change. I look back on my journal and see where the big losses are and it is always the same thing that causes them: adding to losers. That is always, always, always the reason for a monster loss that wipes out at least two weeks of smaller gains. I've known for a while, that if I could just eliminate those infrequent monster losses, then I'd be profitable. I really do think it is just a habit. But in my experience, breaking a bad habit that I'm really stuck on and forming a new one in its place, requires a tremendous amount of determination to change. Usually something like that will take me quite a long time to achieve and then will require daily maintenance to sustain. So reading a post like yours encourages me, because it reminds me that I should not give up, because the only war is against myself and that is a war that I know from experience that I can win. However, I also know from experience, that I will need help to do it.
Adding to losers or averaging down is stupid and it's entirely up to you. Two weeks of smaller gains is stupid, too, but that's what most people seem to settle for. "Ride your winners; cut your losses." Study this. Maybe something clicks. Scalping for tiny gains just to book a green day is generally not a good idea. Failure to understand risk/reward and why you're losing as a trader. | Elite Trader
Thanks, I enjoyed those videos. I've been trading for about 4 years with a ten year break between years 2 and 3. I'm finally starting to use stops. Yesterday and today I was pretty disciplined about that. I still like to jockey for price, by taking a position with a stop and then doubling that position at a better price with the same stop along with an order to unload the previous position at break even. So, that works for me most of the time, but when it doesn't, it can wind up being an oversized loss, because it would be over the 3% of my account rule. So, I used to try and only do that if I was still under the 3% with all stops accounted for, but it seems like that habit of jockeying for a good price competes with the habit of choosing a good entry with a logical stop. So, it's probably better for me to lay off the habit of jockeying for price. Also, I tend to gain a lot by doing that, so it competes with the incentive to hunt for good entries and exits with logical stops. It's like a competing emotional experience. I almost can't imagine trading with out it, but I know I can, because I have. I just slip back into my old habits, after I start seeing the big losses go away and consistent gains start to rack up. It's hard to give up though, because I know there's money there, but I also know it's not worth the risk if I'm adding over the 3% max loss rule. So, I have to quit rationalizing that, so that I can make a living doing this.
I don't know what jockeying for a good price means, but what you describe doesn't seem like a winning approach. From the sound of it, your 1st entry typically isn't good, so you're trying to alleviate that by averaging down and trying to get out without a loss - which works often, but once in a while turns into a big loss. So, the focus isn't on winning, but avoiding a loss? Instead, you should focus on winning bigly and cutting your losses quickly (they should be small). Master your entries and try to get in where you will lose very little if you're wrong. Simple example: Long after a deep pullback versus long after a substantial up move. Add to a winning trade as it moves in your favor without taking on additional risk. Harvest. There seems to be a misconception among many that day trading means high frequency trading focusing on smaller moves. Wrong. If you want to capture the big moves, you need to get familiar with the daily chart and the hourly time frame. Get a piece of those big candles instead of getting lost in ticks on the lower timeframes. If you don't have the proper risk/reward in place (nobody would take a lottery ticket in real life if it cost $100 and the potential gain was $10 even if the probability was very high) you will find it very hard to succeed in this game...
Sorry I took so long to get back to you, but I wanted to work at it for a while and reflect on what you said, so I would have something to say. Yes, I do think my focus is on avoiding loss. Which I think is good, like you said, cut your losses short, but I think I try way too hard to avoid losses (like risking an entire account to avoid any red at all). So, that's mindset. I have to change that. I think it's fear. So, I like this mental approach in this short clip from Bulldog Mindset, How to get over ANY fear in 3 easy steps I know what you mean by looking for good entries. I've been watching Oliver Valez's videos lately on how to do that. I do think I over leverage sometimes, but when I actually count up the risk I'm taking, if the entry is really good, then the risk isn't that much, again providing that the entry is good, which assumes that logical stop is not that far away. I try to judge logical stops from Al Brook's course on Price Action trading. I like to over leverage those kind of trades, even though it goes well beyond the 3% max risk rule. For example, risking 50 or 100 on a 1k account, trading MNQ, looking for a move that could pay somewhere in the 200-600 range on maybe 3 micros. With that high of a max risk level, I would only put up 10% of my trading capital in any given day. So for example, 10k in trading capital, with a 1k account at the start of each trading day and no access to the other 9k, with a max daily loss of something in the neighborhood of 500 and a max per trade loss in the vicinity of 100. What do you think of that? I got the idea for a 1k account from you and the idea of only risking 10% of trading capital on high risk trading from Nick Shawn's channel on YouTube. Adding to winning trades is definitely a skill I have to work on. If I take an entry that is above the logical stop, then I'll add on the losing side of the trade as it approaches the stop, looking for it to bounce and then just close out the whole trade if it doesn't. But that's a small add. (in the past it could be huge, because I would ignore the logical stop and go for a break even exit). So, that's my first add, then my second add, comes at the first elephant bar, on the winning side of the trade. Then, I'm not inclined to add again. So, I exit all of the trade once I hit the profit target or it starts to weaken. If it is really strong I might keep one runner but I'm on the fence about that. On this trade I had a logical stop and a loss limit, with the second add, of just under 50 pts and two contracts. After adding a third on the elephant bar, it ran for a profit of over 100 pts on 3 contracts, but I only sold two once it hit my profit target (500), netting me about 460 with one runner, which I determined to hold until I would stop out at a profit of 20 pts on that contract, thereby hitting my profit target, but on hindsight, I should have closed it out once the 10 am bull flag produced a red elephant bar. So, that was sloppy, but I thought the initial trade went well. I assume that's what you mean by "harvest:" take some profit and let the rest run. After adding the 3rd contract it pulled back but held above the 200 sma, so I held. If it had broken that, I would have looked for confirmation of resistance on the two hundred or just too much red on the trade. I used to play with a larger account. Taking it down to a smaller account (per Good Life Trader's advice, I assume that's you) helped me tremendously with discipline. Because of that, I'm almost tempted to go prop firm and use a trailing drawdown, just because you have to be a "sniper" on your trades to survive. I think I can get a 1k or 1.5k draw down for about 100 per month and it isn't even trailing on one of the forex type firms and trade QQQ. But then I don't know if I should trust a prop or not. I'm sure if you have a problem, after you are signed up, their customer service might not be the greatest, but they seem to offer a better deal than the futures prop firms and with a small account, there's seems to be little difference between trading futures or QQQ with 1:100 leverage that they offer. Obviously, I would rather use my own money, but I like the reduced risk, at least in theory, that the prop firm offers. What do you think? Looking at the daily chart for this screenshot from 7/5/24 using Trading View's Replay feature, MNQ looks like it is in a strong bull trend. On the hourly chart, MNQ looks like it was attempting a breakout of the trading range on 7/4/24 and was holding onto it in pre-market, then going to the two minute chart on 7/25/24 it looks like there was important news at 8:30 am, that the market responded favorably too, however there was a significant amount of selling, but I would think that would be a typical reaction to being at the top of the trading range, so without confirmation, I would assume a continuation of the breakout from 7/4/24. Of course, the market likes to re-trace moves, before it continues its seemingly never ending march to the sky. So, there is always room for caution. So, I think the risk to reward on this trade was reasonable. What do you think? One thing that seems very challenging for me is getting caught in chop. Wednesday June 26, 2024 was a day like that. A day like this seems like scalpers paradise, but if you want to "get the big move," it seems like you could get cut to pieces. I guess it is understandable looking at the daily chart, because I see 3 red bars forming a pullback ending on 6/24/24, then on 6/25/24 I see a large green bar threatening to reverse the pullback, but not quite. So, 6/26/24 was a day of indecision, hence all the chop. And it turns out to be the beginning of a bull flag. So, in that case, I guess the daily chart could be helpful, in that I know if I'm in chop to go for "base hits," instead of "home runs." Otherwise, it would be very hard for me to do better than break even on a day like this. What do you think? I think you are right about risk reward not being upside down. However, it seems like the market is very clever. Which can be so frustrating. I guess I just have to accept that. It would be nice to truly not care whether I win or lose, but I do. One of my favorite YouTube channels, Caleb Jones Alpha Male 2.0 say's, you need "Outcome Independence" to succeed at anything in life, but especially money and women. So, he suggests multiple income streams and just accepting that every business is not going to succeed and, presumably, to treat trading like one of those businesses. Shay from Humbled Trader suggests the same thing. I didn't do that, because I wanted to pour all of my time and energy into learning how to day trade profitably. I didn't want to be distracted by anything. That's how I made it through nursing school at a community college with a failure rate of about 80% and a pass rate on the state exam after graduation of about 70%. That's 14 students out of a 100 getting a license and then a fraction of them surviving their first year. So, I figured pour everything into it, just like I did with nursing school, but now I'm starting to wonder if that isn't too much pressure. I wanted to start a location independent online business after I had become consistently profitable at day trading, not before. And I didn't want to have to go back to working as a nurse, but I could. I would have to go fulltime days for a few months first. And it would leave little time and energy for trading after all the other little things of life. So, I'm really determined to try and become profitable without returning to nursing, because it would force me to take around 3 months off of trading. After that I could work 12 hour shifts on the weekends to make ends meat. But for now I'm still ok on savings. And I've worked at this for so long there's no way I want to give up. But I'm concerned, am I putting myself under too much pressure? Will it ruin my mindset? Should I keep pushing or should I throw in the towel, go back to nursing and accept that I may never be able to make a living at day trading? What do you think?
Sounds reasonable. You may be mixing me up with someone else, though. That's not me. Personally, I think Topstep and possibly a few other firms offer a good deal. The drawdown is tight, but then again, nobody forces you to trade a full e-mini if that's too much. Trading is unlike anything else in life. Everyone thinks they'll be the exception, but realistically, they'll just be another statistic. Soldiering on is a personal choice. I know a guy who gave up on the idea of full time trading, but still likes to play the markets like a hobby on his off time. Then you have a few stories about people who quit their jobs and actually made it work, but they're the few. I think the best choice for most people is to have some kind of income through a day job or similar and then trade on the side in whatever capacity they can manage - be that day trading or swing trading or just investing. You will then know yourself through experience if the day job is actually a hindrance or not.