What i learned after loosing 50% of my trading portfolio.

#1
"Speculate with less than 10% of your liquid net worth. Risk less then 1% of your speculative account on a trade. This tends to keep the fluctuations in the trading account small, relative to net worth". Ed syketo

What made the experience so profound was i used 50% of my liquid net worth and 2% risk. Mind you, i took my time doing it, back-tested the system thoroughly for many years, forward tested the system thoroughly and then committed the amount. Knowing what DD your system can give and experiencing it are totally different thing.

I was ready financially to take the risk but not mentally, realisation came after a serious DD and massive massive mental pressure. Bottom line, no matter the system if you are not ready mentally to handle the risk it will become literal torture to move forward wit your trading plan, you ll go in massive self doubt, start tinkering wit your system or give it up on it altogether, it will literally become unbearable to execute trades. And if you are too emotional type then god help you, your mood will do summer- salt along wit your equity curve. Its a journey of self discovery and market will exploit your week points wit full force.

All this experience is on mechanical trading system, Its get even difficult for discretionary trader, they literally have to decide where to enter, exit, which trade to take or not etc, if one that they let go end up being a big winner it will throw them out of their zone completely, or worst if they are already in a bad mood and this happens. its a huge huge task to do on every trade cause already millions of things are going inside our mind and if you had get up from a wrong side of the bed this morning then its better not to trade that day.

"When i was making money i cannot wait for market to open, when i was loosing money i cannot wait for market to close". Book: What i learned after loosing a million dollar.

What ever i have written is nothing new and you can find it literally in most of the books and sites, even i have read most of the stuff when i was starting out but as the saying goes "akal badam khane sae nahi aate, thokar khane sae aate hai".

I ll pen down my feeling here, not in any particular order but as it comes to my mind... cheers
 
#2
How market promote bad habit.

I have taken huge number of trades till date and my motto when i started trading was "Trading should be like breathing", don't think, just execute cause once u have a tested system thinking has no place in it. But then market is smarter than us and we as a human are loaded wit emotions, which sometime makes us believe we are smarter and know what we are doing. The change is so subtle that u wont even realise it till later that it has become your habit to tinker wit the system.

I was in a long trade and market was trending in my favour, all i have to do is to trail my SL period. A market made a swing i move my sl below it, again market made a new swing but the difference was only 2-3 points between the last swing (were i moved my sl) and this new swing, so i though of not moving my sl to new swing low as difference was only 2-3 points. Market came down to new swing low ticked the sl price and moved back up,
though i have not moved my sl from old swing but if i have moved it i would have been stopped out and had to re-enter again at higher price and it actually happened too, cause my system gave me a new long trade which got triggered.

Now my smart brain started thinking, just cause of 2-3 points i have saved a new entry in the same direction, i should not move my sl to the immediate low, This turned in to a habit and the truth is it never happened after that day and even my 2nd last sl was taken out by market every time and lost more money then i should.

Then one day i was wrecking my brain on a decision whether to move sl to immediate swing or not and got so frustrated, irritated and In that frustration i realise that i have forgoton my motto, I was putting too much thinking where it was not needed. Even now sometime i do things which are not required and end up loosing more than i should but i am learning to trust my system one trade at a time.

cheers
 
#4
One more instance,

I was long and market was trending up, and this time i was moving my sl below every swing without giving a thought, Follow the system was the mantra. Suddenly in last half hour market started trending down and closed around 10 points above my sl, i took long home and forgot about it for the rest of the day, Following day market opened gap down and boom i lost whatever profit i made previous day, got nothing literally and i was in good profit previous day.

After 2 or 3 months same thing happened, i was long, market trending up, sl below latest swing etc etc. Again same thing happened, last half hour market came down and price was trading above 10-15 points above my sl in last 10 min, now my brain kicked in picking up the old experience from the past, asking me to cover the position and trust me it was really difficult to fight the urge to close the trade and after too much back and forth, weighing pros and cons, again going through irritation frustration cycle i took the long home, i was not in much profit but MTM was positive, again following day market opened gap down and i lost my total risk amount. Dame! i was angry, frustrated, irritated, u name it an i was going through all that emotions, how can this happen to me again, i was just following the system.

It was Friday and i was in good profit for the day, last hour market started trending down but this time i was ready and it was Friday, there was no way i am gonna take a position home if price was about to close near my sl, at 3.25 price was at my entry price, i thought "why not close the position as i was not loosing any thing and will make a new position on Monday, new week new start", it was a win win situation i though. Covered the position and forgot about it for next 2 days. One more thing, i don't check any market after Friday when our session ends, reason: if international market moved against your position along wit SGX nifty your whole weekend will be fucked and u cant do any thing about it, so for a good nit sleep and relax weekend don't watch S&P 500 closing.
Comes Monday, i got up at my usual time and thought of checking where nifty in trading on Investing.com app, then i though "rehne do and let market surprise me". so came and sat my trading terminal, dollar opened negative (-).28% from its previous close, "may be a small gap up" i though, at 9.07 spot opened 100 points above it previous close and i was like....
 
#5
You are a buyer after you sold and a seller after you bought, always, every single time you enter a trade. Think about the latter before you execute the first. If others follow you after your entry, you will land profitable otherwise not. Period.
 
#7
My last 4 trades:
14th sep went short, market went up, lost full exposure, while closing long trade triggered and i was long on friday at 3.15pm.
17th sep market opened gap down again lost full exposure ( luckily market opened just above my sl ). Again got a signal for a short trade and went short, my tsl was 11453, in 2.10 bar market ticked 11455 and again went down and close at the low of the day, now i was pissed. I have been doing it from quit a long time but still these kind of trades wreck my nerve and throw me off balance, though i never have difficulty pulling the trigger if system gives out next trade but still these kind of trades affects me a lot.

I slept over it and next day (that is today) i was all set to take my next trade as soon as i get one, and within opening 1st hour i got the short trade, now this trade was literally a continuation of previous day short, Took the short trade, punch in the exit sl went out for some work came back in half n hour and saw market was trending up, in next 1 1/2 hour price was literally flirting wit my exit sl, now tou i have lost it completely, market has not even given me a chance to move my sl lower, I was fucked for the day, mood was gone for toss, i cant focus on any thing and was thinking what the hell just happened, back to back 4 full exposure losses. Mood is still sour but what can be done beside accepting the trade out comes and follow the system.

There is a difference of night and day between back testing and forward testing a system, because in back testing you dont have to live wit a loosing trade for next 18 or 20 or 24 hours until market gets you out and that is the time your mind will play tricks on you, self doubt will be at full force, this is the time trader will start tinkering wit his/her system and will make it worse for them-self's.

Back test will give a continuous losses for next 14 trades and you will think ok no big deal i can handle this, but trust me when this will actually happen your mind will explode, you ll pray to god ke "jaldi makret band ho and you stop loosing", every time price comes near you entry price you ll pray ke ye trigger na ho, if trade got trigger near your lunch time u ll stop feeling hungry and even if you try to eat food wont go down your throat cause it will be so dry due to fear, these 14 trades will be the next 14 days and these 14 days will be the longest ever, I bet most of the trader will give up in 5 or 6 losses and wont go beyond that, because it becomes so so so difficult to pull the trigger, this will be the acid test of a trader, finding the system if easy but following it in thick and thin is a totally different ball game. Never assume that unreasonable or unexpected can never happen, it can, it will and it does sooner then you expect.

Its all boils down to how much is at risk, say for example trader liquid worth is 1cr and he uses 10% of it wit 1% risk then may be he wont feel the heat, but like me if he uses 50% of it wit 2% risk then games changes totally.

I wish all the luck to newbies, who is entering or thinking of entering the most competitive game in the world.

cheers
 

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