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Horrible trading. Please help!


Everyone knows how trading has been of late and it was horrible for me. I just blew out my account for the first time and it is a terrible feeling. I am trying to figure out how to get back from this and I am hoping that I can. This has really been a terrible experience from me and the least I can do is learn from it.

Any advice from you guys would be greatly appreciated as well.

Thank you.
quote:
Originally posted by day trading

I have a question for you: With hindsight, would you have paper traded for longer or do you think that trading real money and coming out slightly ahead (if I understood you correctly) was a better education? That's a bit of an ambiguous question so let me try and rephrase: Do you think that the risk of losing money by trading real money after such a short paper trading stint was worth it? Even though you came out slightly ahead, would you take that risk again?



I made the move to real money because I was doing so well on paper and it seems pointless to continue practicing when I could be profitting. What I found out right away was that it's a hell of a lot easier to paper trade. The first time I put real money on the line, I felt sick/anxious/excited/etc. I panicked when the price went against me by two ticks and was elated when I made a profit of a single point. That emotion I felt changed everything. I don't think paper trading any longer would have curbed that emotion.

I believe the best use of paper trading is to develop, test, tweak and test again a given strategy. When you're consistently seeing positive results, you can make the move. I would now recommend doing both simultaneously. Let's say you've developed or acquired a reliable strategy for a trending market that seems to do well but it doesn't work so well for a range-bound market. You can trade your trending strategy - when your signals appear - and paper trade a range-bound strategy until you tweak it into consistent performance.

quote:
Originally posted by wsjalerts13

What do you guys think would be a good time frame to start trading real money? I am thinking maybe 3 months than start with 1 contract till i get a good grip. Let me know your thoughts.

I guess I don't think there is any set time frame. When your strategy proves consistent and profitable, you can move. The key to all of it is sticking to the same exact strategy you employed on the paper-side. It's crucial to put the emotion aside or at least tame it to prevent you from completely skewing your results.

On the other hand, this theory of mine comes after watching the market move every day it was open for 6+ months. While that's nowhere near what some of members here have logged, I do have a sense of what to expect (e.g. 200 pt moves on the S&P are not very likely, but a 10 pt spike could happen at any time). Having the luxary of watching the markets move and learning their rythym with no money at risk is priceless. So to ammend my earlier answer, I'd say when you have a good strategy and you're comfortable with the market's behavior.

A technique that pt_emini once suggested when paper trading was to take a pile of cash (physical dollar notes) and have them next to you. Split the pile in two - half for the market and half for you. Then at the end of each paper trade transfer the cash from your pile to the market pile or visa versa. Depending on how much cash you've got lying around you may need to divide by a multiple of 10/20/50 or so.

The idea is to see the money move in and out of your trading account and help create those emotions that you'll experience when trading real money.
WS,

Try not to think of paper trading as something you do once then move on to real money. Paper trading can be a valuable tool especially to a beginning trader, the trick is to get it as close to emulating real money trading as possible. As Culsu pointed out there is a night and day difference once you switch to real money and your emotions get involved.

You may want to consider trading real money for a day (or just one trade then working up to a day)then switching back to paper, by switching back and forth you can start to get paper trading to have a more realistic feel. I'll give you an example: Let's say you had a successful day using real money, but now you're back to paper trading with a rule that you need to have two successful winning days on paper before you can go back to using real money for a day. By doing this you have now brought your emotions into paper trading because you will want to return to real money as soon as possible because your first experience with real money was a successful one.

I'm not sure if I'm making sense or not, but the main point is to look for ways to use paper trading to help you even past your initial learning process.
quote:
Originally posted by wsjalerts13

Very nice writeup Culsu, that helps a lot. I am sure this has saved me a lot of grief.

I have been paper trading for more than a week now and i have made around 5K and i have to be honest i have had the feeling of putting in real money so tempting but controlling my emotions not to jump in as i have a lot to see and learn. Its good i stumbled upon this website, i try to follow these guys - sometimes don't understand the phrases being thrown around have to google it :-)

Hopefully i will be able to learn from the facts/rules you guys put forth.

What do you guys think would be a good time frame to start trading real money? I am thinking maybe 3 months than start with 1 contract till i get a good grip. Let me know your thoughts.

Thanks.



What you want to track is your consistency, day to day, and week to week. What I am referring to is your capacity to follow the rules and your trading plan. A trading journal will help you gather the needed data each day. Write down each trade you take in your journal, making note of things like: did you follow or violate any rules, did you follow your trading plan, the state of your emotions before, during and after the trade. A checklist works well for this tracking, in fact you can put your checklist into a spreadsheet. At the end of each week and month you can then can perform statistical analysis on your performance. All of this implies you actually have a set of rules (see above...lol) and a trading plan to follow


Doing this extra work for each trade will help reinforce your rules and plan, over and over again until it becomes second nature to you. The goal is to know the right thing to do in each situation, and to take the correct action without hesitation.

I would suggest you want to prove to yourself that you know your method cold and you can in fact follow your trading plan most of the time for at least 4 weeks before going live. The journal/spreadsheet will help you objectively quantify your trading performance. Once you start live trading with real money at risk, continue the journal and compare your results.

The primary hurdle faced when moving from paper trading to live trading is how your emotions affect your judgment. As soon as your order is filled, your mind naturally wants to narrow it's focus on the market. Traders start watching every tick quickly putting them on an emotional roller-coaster. If your reacting emotionally to each new tick, it will be very difficult to stay focused on your trading rules and plan. It then becomes very easy to slip from trading into a gamblers mindset.

With that in mind, consider this suggestion: Your job as a trader is to execute your trading plan by following your rules and placing your orders in a timely fashion. The market's job is to find a way to move the trade through time to its eventual outcome. What the market does after a trade is entered is beyond (outside) your control, you have no control over what the market will do next. The only thing you have control over is your actions: how well you follow your rules and trading plan. Understanding this reality will (hopefully) reduce and eventually remove most of the emotion from your trading experience. The less emotion you experience in each trade frees you to have a clear mind to execute your plan correctly. The more you execute your plan correctly, the more consistent your results become. The more consistent your results are over time, the more likely you will achieve the your trading goals.
Culsu and Myptofvu,

Thank you both for your valuable advice i think it absolutely makes sense, take for instance i went long yesterday at 1125 16:33 and i have it still open (with stop loss in place). Now i am up more than a 1G would i be doing the same with real money don't think so would take my profits off the table.
Thank you pt_emini, this is the kind of knowledge i won't get from any books. For now i am also learning not how to make money but how not to loose money :-)


Thanks again.