Saturday, 8 November 2014

Struggling Phase



 
In our career or profession, in initial phase we all go through some form of struggle till we achieve success.  Trading as a profession is no different.  This struggle actually makes us more strong and capable and helps us to be successful if we learn the lesson out of it.  When I first started day trading with DPs I was struggling a lot.  Most of my trades were hitting the initial stop loss.  It forced me to stop trading.  Then I tried to analyze what was going wrong. I found out that my one of the problem areas was related to discipline, self-discipline. I was lacking discipline.  I was keeping the SLs and adhering to it but not following good money management, not following other rules of trading.  Sometimes I was overtrading, sometimes I was hesitating to initiate trade.  So I decided to work on that.  I made some rules and decided that I would strictly follow those rules.

Rules that made a difference in my trading:

Maximum number of trades in a loss (where initial SL gets hit) allowed per day is 2.  Maximum number of loss days allowed per week is also 2.  If there are losses for two consecutive weeks, stop trading for that month.
This helped me to limit my losses to around 5K for the Nifty 50 lot per month.  I never lost more than that once I started following it.

Restrict to only one losing trade per DP or cluster of DPs.  If the trade was in a loss, do not trade again at the same DP.
This kept me away from overtrading and kept my emotions under check while trading.

Avoid taking the trade when the price is in a channel or DP is barb wired between the range.
This also helped a lot in controlling the losses whenever I was able to suspect it early.

Avoid taking the trade in same direction when it has run up a lot, e.g. 40 to 50+ or more.
This helped me to avoid trading overextended, over-stretched, big gaps kind of moves where we can suspect range-bound movement after such moves.

No BO trade of any type, PP, cigarette, range BO etc.
Most BOs fail and this rule saved me a lot from those failures, though I missed sometimes very good BO moves.

Take a break for 20-30 minutes after every trade.
Break means focus off the trading screen and not thinking about it for some time.  Doing something else, like chatting with others, listening music, anything.
This too helped me a lot.  A small break after the trade, no matter what, winning or losing, helps in many ways to keep me calm and focused and think from the scratch.

Plus, I avoided trading in the following situations where I felt it was hampering my thought process and making me take wrong decisions.

  • When I was mentally upset.  Because I feel your surrounding/environment, at home or at work, should be conducive to trading.  You should not be worried or anxious or angry or upset over something.
  • Crying over spilled milk.  You missed a good trade and that feeling of being left out makes you not to think straight.
  • Itch to trade.  You are not getting good opportunity to trade and the itch is so strong that you end up taking wrong trade.

I simply avoided trading for the rest of day once such emotions started affecting me very strongly and I was not able to get out it.

These self-made rules initially were very difficult for me to follow, but I decided strongly to stick to it.  There were many days where I had lot of reasons not to trade and I did not trade actually.  I was getting upset easily, was crying over lost opportunity, was watching the trade to move in my anticipated direction without me.  I did not escape from those emotions or tried to control them.  I just avoided trading in those situations till I was more mature enough to handle them.

This approach to address the self-discipline and cut the losses by being a disciplined helped me a lot and gradually over a period of time I started making the right decisions.  Later I modified those rules as I gained experience and confidence.  I even started taking the BO trades more confidently.

If you feel you are in the same struggling phase where self-discipline is the culprit, make your own set of rules, be honest to yourself and be disciplined in following them.  The rules that you make and follow, make sure address your problem areas, your personality, your lifestyle and your goals.  What works for me, may not work for you.

Wish you all the best.

 

21 comments:

  1. Very well written and Awesome!!! I can relate to this.
    DM

    ReplyDelete
  2. Very well said and done, whatever you have said is implemented by you and it also reflect in your trading style. I have gone thru your post and monthly performance review , you have improved a lot.
    After seeing your post and comparing it with mine and after that reading post of ST and its comments , picture is getting clear and clear. From you i learn to keep performance trekking, which now I m doing it.Good habit to know pros and cons of ourselves.

    Keep posting

    MT

    ReplyDelete
  3. Nice article.

    I too have stuck with DP for almost 10 months now, but yet to get into positive. Still practicing.
    Some points from my side:
    1. Stopping trading after two loss may not be optimal solution. I suggest two alternatives.
    a) Manage your position size per trade so that you are not stressed out after two consecutive losses
    b) If that is not possible, then at least continue to paper trade. Do not switch off your terminal.
    Every trade is a learning opportunity.

    2) Even though I suggest paper trades above, paper trading performance does not reflect actual trading performance. My Win% in paper trades is almost 65-70% while in actual trades its just about 35-40%. Even the Average Win: Average Loss in my paper trades is so much better than in real trades. Surprisingly my win% in paper trades also starts going down as the date for me to start real trading approaches !!!! I am stating this just to show how much your mental setup contributes to your success as a trader.

    3) I dont know if its something specific to me, but I have found that I do better trades when I am mentally upset!! Its probably because I am more critical at the moment and analyze much more minutely before entering into the trade. When my mood is OK, I am more optimistic and my level of analysis goes down a bit.

    ReplyDelete
    Replies
    1. PA Trader

      The basic idea behind stopping trading after certain number of losses is to limit losses and preserve the capital. Once we enter into the trade we have no control over what the market will do. What we can control is our exit. Just decide upon the amount that you would probably lose and stick to it. Once that limit is reached, stop. Stop losing more. That's it. You can do net practice anytime, during market hours or off hours, to improve your skills. Why to risk real hard earned money when things are not going in your favor?

      It is universal truth that we tend to do better when we simulate the trades but the results are different when we actually trade. In live trading the real character of the trader is tested again and again. That is the reason why we strive for success in the market.

      I would suggest you to sit in a quiet place, understand the problems that you face, find the cause of it. Once you know the cause, you will be able to find the solution.

      URD

      Delete
  4. Thanks Dave very good post.
    Also one thing observed is a person changes (noticeable changes), when transitioned from loosing trader to a winning trader..

    ReplyDelete
    Replies
    1. Shashank

      Thanks. I hope that person is not me.

      URD

      Delete
  5. HI URD,
    Very helpful information! You are very generous! to share everything with us.

    Thanks
    Arunkumar.C

    ReplyDelete
  6. Thanks a lot Dave ji.
    - Another looser :(

    ReplyDelete
    Replies
    1. TraderInTheZONE

      As long as you stick to it and do not give up, you are not a looser. It is the tuition fees that we pay to the market. Keep improving yourself.

      URD

      Delete
  7. I came across ST's DP method quite a long ago and quite impressed with it. I had the similar kind of problems (and few more) during my initial struggle days. Your blog made me little homesick with those days. However, my way of recovering and improving my system was different as my target was to trade full time with couple of hundred contracts. Now, I trade full time and positional, but my core concepts (around DP/ critical location) remain the same.Thanks to ST and you for making new traders' thinking in right direction.

    ReplyDelete
    Replies
    1. Reso Trading

      Great going. Keep it up.

      URD

      Delete
  8. Daveji,

    Very good post and it rightly triggered a nice discussion.

    My 2 cents. It is a long learning process for any newbie and the trick lies in lasting so long as it takes, without exhausting the resources. "How long it takes" may vary from person to person. Anybody can be a winner, provided he endures this period, losing only that much he can afford to. So, newbies must come prepared for what lies ahead without any unrealistic expectations. During this period the focus must be only on limiting losses and obtaining the necessary knowledge and the discipline to execute it on a consistent basis.

    How we go about our learning process also plays a crucial role. It is a must for every newbie to record his trades in the form of a blog or by other means, every day along with the commissions and omissions of that day. Constant review of this record helps in improving the procedural memory. Otherwise, we may end up committing the same mistake again and again.

    This post really made me pause for a while and asses where I stand. Many thanks to you and all the participants of this discussion.

    S.Karthikeyan

    ReplyDelete
    Replies
    1. SK

      Your thinking and efforts are in right direction. It is just a matter of time. Hang on it.

      URD

      Delete
  9. Thanks Daveji, these encouraging words mean a lot to me.

    S.Karthikeyan

    ReplyDelete
  10. Hi Dave,
    Yes a lot of discipline is needed for trading and we do need to train our minds to be disciplined.
    Thanks for sharing these guideline, they are very helpful.

    Regards
    BS Chandran

    ReplyDelete
  11. Thanks for sharing this. Really useful information for every trader. I believe it applies to other walks of life too..

    ReplyDelete
  12. Thanks for sharing your struggling phase. Most of the traders are going through this phase including me.
    I've got the confidence that even good profitable traders like you gone through this struggling phase.
    How much time took for you to over come this phase while trading DP methods and how long you have been trading DP Method.

    Thank you,
    Kiran.

    ReplyDelete
    Replies
    1. Kiran

      The idea about writing this post was that if you are also going through the same phase, find out your problem areas and address them.
      I started my journey with DPs and ranges couple of years back under the guidance of ST sir and that journey is still going on. I am yet to reach to my destination.

      URD

      Delete
  13. URD

    Thanks a lot for the writeup.
    I can relate to the whole post.
    Here's wishing you terrific success!!

    Thanks
    TBP

    ReplyDelete
  14. Thanks URD for this thoughtful post.

    Regards,
    KSG

    ReplyDelete