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     dojistar
Member
Username: dojistar
Post Number: 1
Registered: 05-2007Rating: N/A
Votes: 0
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| | Friday, August 03, 2007 - 12:41 pm: |  
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This is my real post but I really need some help after having loss so much in the past 2 weeks from this highly volatile market. I only just started trading CFDs and have a system which I've backtested nmpteen times with confidence but ever since starting my trading adventure on the 9th of last month I've made around 30 odd trades and have made losses of over $6000 in the past 3 weeks. As you can imagine I am absolutely gutted and disgusted. And the thing that hurts most of all is I followed the rules of the system cutting all my losses as soon as my maximum loss level was reached but as soon as I close the position reverses and goes in my way. As a result what I want to ask is this :
If your in a position and it makes a large downwards move tomorrow whether it is straight gap down from the open or over the course of the day then this will stop you out. But if you did all your analysis right and the stock is from a good entry(eg in uptrend on pullback volume etc etc) AND there is NO negative news on the company then I believe you should stick with the trade and NOT CLOSE it rather wait it out next day or two to see if you can atleast get a better price to exit from or even have the trade turn positive. Because if the large downday spike is unusual for the recent price history then treat as such - a market overreaction or correction whatever you may call it. Hence it does not mean you should immediately sell at your stops because that should only be the case when the price "GRADUALLY" drops over a few days not one large massive drop from a panic selling day. What I mean by gradually is its falling within the normal price range (ATR if you will) for the stock. If the large spike down was because of some bad news around the company then for sure get the hell out sooner as it will get worse but if nothing fundamentally has changed with the company then dont let the fear of turning a loss turn into a bigger loss grip you because stastically it favours a turnaround and what your experiencing right now is really just a correction which will eventually come back to its original levels.
I know one of the cardinal sins of trading if not the biggest is to let your losses grow by not cutting your losses short. Well I'm at the point where I'd say stuff that as its only a subjective rule you should follow based on the stock and market conditions because if you follow that blindly then you'll experience what I've been through ..absolute massacre from the markets as its see- sawed its way to squeeze my shorts one day to turn around and dead cat bounce my longs then turn around again to squeeze my shorts before going back the other way after I'm out at my stop loss.
I do strongly believe you should cut your losses but I dont think you should follow it rigidly because if the stock behaves uncharacteristically by dropping so much and nothing is wrong with the setup and company is still good then its wrong to sell as the move was overreaction and should just let it pass as its bound to go back higher.
Tell me if anyone has felt like wanting to break the rules for this because had I held onto my positions for atleast another day risking a loss from $250 to $1000 I would have seen a dramatically reversal to be in a profitable position.
Thanks and feedback appreciated.
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ingot54
Member
Username: ingot54
Post Number: 1896
Registered: 05-2004
Rating: 
Votes: 3
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| | Saturday, August 04, 2007 - 11:16 am: |
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Dojistar
Having donated quite an embarrassing amount to the CFD companies, I can totally empathise with your position. I actually lost not only my large profits, but my capital as well, on 2 occasions.
The first was the correction on 5th and 6th October 2005.
The second was 11th May 2006.
ON the first occasion - I had never experienced any sort of a pullback in the markets, and wondered what the dickens happened. Bye-bye $26k. $15k of it was my starting capital.
The second occasion was even more painful, but less costly.
Emotionally I struggled with ever getting back to trading, but one day before the next correction, I did have another go.
Here are a couple of details:
On 10/05/06 I bought 2000 KZL @$4.41 - sold on 15/05/06 for $4.42 - costs caused a small loss.
On 11/05/06 I bought 300 BHP @$31.62 and sold on 15/05/06 for $30.65.
After that, BHP dropped further, but my TA showed a rally was possible. They reached $30.01 and I bought 1100. I disregarded all money management rules, and sold @ $26.65 on 08/06/06.
My losses then were just over $4k on that one trade. Over the next 3 weeks I threw away a further $7.5k on about 20 other trades.
OUCH!
Rather than have a pity party,(which you are not doing) I sought solace in knowledge (which you ARE doing).
On both occasions the market touched me at my weakest and most neglected point - money management. My "stickability" and determination was working against me. When I am on to something, I don't give up. But I should have stepped back somewhat at that time. That is what I suggest you do.
There are times to pause, as opposed to giving up, and it took a little while to go over my trading diary, and my notes to discover what the heck went wrong. I say it "took a little while" because emotionally I was damaged from the experience, as well as having a disillusioned spouse to placate.
Fellow traders have all tried to warn me, assist me, guide and correct me over the past few years on IC, and the support and encouragement I received here has made me stronger, safer and wiser and now a little profitable when I do trade.
So where to go from here?
Your situation may be quite different from my own. The first thing I discovered was that the CFD providers are not acting as your counter-party out of close friendship. They are wolves in sheep's clothing - out to provide you with a service if you know how to run with wolves.
But the blame is not on them - they clearly outline their rules - it is for you and I to understand the application of those rules. What they do is legally outlined and set out. But the odds are set heavily against you because of the leverage and volatility ... odds which strangely enough can also lead to your profitability and longevity in trading.
Then how do you survive and even prosper?
The very first principle is the preservation of capital.
The second is the use of money management.
The third is psychological preparedness, education and mind-set, and experience in practice accounts.
The fourth is to know the amount of leverage used, and how to manage it.
The fifth is the use of stops - placed too close they will be taken out EVERY time.
Placed wider they will cause large drawdowns.
Placed too wide they offer no real protection in a crash situation, due to the leverage.
Placed correctly they are useful, but discretionary ("this-is-not-working") stops should be foremost in your mind.
The sixth is the taking of profits at the correct moment.
The seventh is the choice of instrument traded - Forex, Equity, Index, Options and so on.
The eighth is your entry point and timing.
The ninth is patience and alertness.
The tenth is to be teachable.
I have made these up on the spot, so they could possibly be shuffled or changed, but you get the idea - there are certain immutable principles which will not take lightly to being violated.
I would be happy to elaborate further on each principle, and hope other IC members join in with their views.
As a fellow traveller I would be interested in assisting you to not only get past the pain of this, but to move forward to profitability.
One of the first things to do is to stop trading completely - even if the market looks OK and/or you look like missing an opportunity to recover capital.
STOP.
Discover the elements causing your drawdown and account depletion, and work on the elements which lead to successful account growth.
This thread no doubt/hopefully will attract traders with more expertise than I have, and I congratulate you for having the courage to ask for assistance.
You will receive it.
With best wishes
Ingot.
Keep Smiling - Don't look back
Trading style: Chartist Artist _ Breakouts and Shakeouts.
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spider
Member
Username: spider
Post Number: 2579
Registered: 10-2002
Rating:
Votes: 1
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| | Saturday, August 04, 2007 - 12:51 pm: |
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Hi dojistar,
your post has forced me out of hibernation.
These days, only the posts from the Psychology section come through to my email box.
Go back and read ingot54's post again.
There was a time when he was asking the same questions that you have.
My first impression from reading your post was that you are trading the wrong instrument.
CFD's will eat you alive unless you use them wisely.
Treat them as you would options.
Those of us that wait quietly for those big drops (and there haven't been that many in recent years) know that CFD's are a gold mine for 'short' traders, but a mine field for those that try to trade them like straight shares.
I assume that you are in CFDs so that you can get the maximum 'bang' for your buck?
It is most important that you write down all that you have done during this time, and all that you are feeling, so that you can go back to it when you have learned how to not get yourself into this spot again.
Just to re-inforce something that ingot said: the decision to not trade is a valid trading decision.
Sometimes you just have to admit that the market conditions do not suit your style of trading.
You were continuing to hold long positions when the market was screaming at you to go short.
Be a good listener.
Hasten slowly.
Go back and pull ingot's answer apart, and ask him questions on each point that he made.
He has been where you are now.
His experience is your gold mine, go mine it.
spider.
There is a new puppy in spider's household, and he is taking all my attention at the moment.
Don't you just love winter?
Winter sunshine, cool walks all rugged up, open fires and copious amounts of red wine.
This is truly a magic time of the year.
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captain_chaza
Member
Username: captain_chaza
Post Number: 2596
Registered: 02-2003Rating: N/A
Votes: 0
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| | Saturday, August 04, 2007 - 07:31 pm: |
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Ahoy Sea-cadet Dojistar
Why did you start out on CFD's?
My Broker once told me over a couple of VB's (a truth drug)that the worst thing the ASX have ever done was Introduce CFD's and Market Depth to the unsuspecting public!
As I have said for many years here on IC
I have yet to meet a consistent Winner in these new fangled CFD's
Crikey!
These are like going to the races with $1000
and be allowed to get on (leverage) say to ~?$ 20,000
and that is only If you remember to put in All your GSLO's and can get out on all of them
I wonder how many GSLO's worked lately?
How did they pay out on the Gap-Downs?
Did they Work?
What I am saying Is
Did they work?
The Only ones who I think are selling at the moment are those who "HAVE to SELL" ( CFD's / Margin /Hire Purchase Buyers) and a those Gutless Wonders who just plainly Panic
I myself will probably go into "Sailors Shock" and do Nothing on Monday although there seems to be a little Divergence developing in a few indicators
Monday Night in Wall St could just confirm a few?
Salute and Gods' speed
"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.
"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893
"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897
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captain_chaza
Member
Username: captain_chaza
Post Number: 2597
Registered: 02-2003Rating: N/A
Votes: 0
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| | Saturday, August 04, 2007 - 08:46 pm: |
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Spider likes to go for walks
I like to Play Golf
Which Ever is your fancy this has NOTHING to do with mind games
As a Technical Analyst it sometimes takes time to for indicators to recover
Both the Leading and Lagging Indicators
In the meantime it is not a bad idea to go for walks , Play Golf, or catch up with some old friends and see a few new releases
But always remember the Middle and End Games / Tacks
Winning is Everything
Never Ever tell any one you had a short term strategy
EVEN if you did
The secret is to say Everything you do is "LONG TERM"
We all know there is NO such thing but it works when things go wrong
It's always worked on my mother and spouse
Crikey!
If one can't see what is happening in front of him?
How can he say he can see what will happen after 200 revolutions of the Sun?
We are so lucky to have our Mums and Dads Brain-washed to such a point
WE can actually get away with this
"The Greatest Lie Of All!"
Even Our Great and Wise Admiral Col'n Has made Provision for these Greatest Of All Lies
This is what I call simply appealing to the Public and providing a service
How do these Great Liars distinguish between Long Term and Short Term trades???
ANSWER: They don't!
I think It is just a matter of "Safety in the Excuse!"
BUT AHOY THERE!
Is not Everything $-wise based on End Of Each Financial Year?
Call it what you wish!
Hide behind Old Proven Lies!
The fact is we Invest from "One Financial Year to the Next"
Salute and Gods' Speed
"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.
"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893
"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897
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smallworld
Member
Username: smallworld
Post Number: 623
Registered: 01-2004Rating: N/A
Votes: 0
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| | Saturday, August 04, 2007 - 11:32 pm: |
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Hello dojistar
I have to read your posts quite a few times because I think you've said a lot of things and I want to make sure I understand it all, including the question that you ask.
1. You have a system that you've backtested and you were confident in.
2. And you were surprised and hurt that you have made substantial losses since you started using it.
3. You were hit by what I called "bastard reversals" a number of times
4. Now you have a specific question about a large gap down that would normally stop you out and somehow you want to hold onto those losses for a few more days to see if it will turn around. So the stops is the right stop if price is continually falling but not if it a large gap down, right?
5. You even have the justification for holding onto these gap loss as the market could well be over-reacting during these times.
Since the rules are subjective anyway, you were wondering if you could bend them a bit.
All of the above seem logical to me, but I'm still having trouble giving you a straight answer. One of the reasons that I'm having such difficulty is that your question cuts across many facets of trading, all of which are essential to your trading success. These are:
1. the freedom you have on deciding and changing rules
2. Your system performance
3. Strategy in dealing with Gap down.
4. Your risk management or as other calls it money management.
You see, they affect one another and if I address them in isolation they probably give you the wrong impression, and wont help you in your trading.
Sytem Performance. As far as backtesting is concerned, one of the most important review is to compare your current statistics with your backtest result. Specifically, Is your current drawdown larger than your maximum drawdown in your backtest? If it is, then your system is no longer working according to your backtest and you shouldn't trade that system as it is. Alternatively, the system could be performing as expected, but your drawdown is higher than what you are comfortable with. Either way, you have to use this opportunity to either modify your system or your expectation, or both.
Risk management - Risk management is all about staying within your risk parameters, knowing how much to buy, when to hold and when to fold. Those who stay within their own parameters are deemed to be strong handed, their judgement are sound and they are alert. On the other hand, those who are not have weak hands, they judgement are clouded with their emotions and they are in a distress and alarmed state.
Gap down - Even though there might be a point in what you say, but who's to know what will happen next. As you move away from the system that you backtested, you have lost your edge, or if you were a pilot, you would be flying blind. This gap down is a good idea to take back to your lab, but not a good idea to try on the fly, without any experience backing you. Things might turn around, but usually only after the stocks have shifted from weak hands to strong hands. And remember what kind of hands you have when you are risking a larger loss than your risk parameters would allow and you are not following your system anymore.
Freedom to choose - This is the simplest, but also the hardest to get. As this is your trade, your money on the line. you have complete freedom, who is to say these rules are for you or not, except you. Implicit in your absolute freedom, you are also the most powerful person you have to face, even though you might not realise it. You are in a position to single handedly change the course of your fortune. However, with great freedom and great power come great responsibility. You are the cause of your fortune if you allow it. So choose wisely, allow probability work for you.
Dojistar happens when a stock in hanging in balance. I feel not unlike your username, your journey is also at a cross road.
I wish you good fortune.
smallworld
(Message edited by smallworld on August 05, 2007)
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tbreak
Member
Username: tbreak
Post Number: 111
Registered: 06-2004Rating: N/A
Votes: 0
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| | Saturday, August 04, 2007 - 11:53 pm: |
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I been there myself at times so I really wish you well. Nice to read an Ingot post again Ingot.
I only just started trading CFDs and have a system which I've backtested nmpteen times with confidence but ever since starting my trading adventure on the 9th of last month
Perhaps you could think of it like this. Do you know how to play football maybe played a few games in school. Great cause Darren Lockyer is out injured. Here is your Aussie jumper you going in against the All Blacks, you will be calling all of the plays and by the way they plan to target you in the game. How do you think you will go.
In someways you have done the same thing. Jump from the side line straight into CFD's armed with arm chair experience. I would suggest you drop down a few levels so you can build your game time and learn the basic's on the field as well.
Drop down a few levels is all about finding a level where you can survive while you get on field experience. It might mean you save up and replace any lost on your capital on each losing trade before you can take another trade. Could I suggest what ever it is, add to your trading plan.
but if nothing fundamentally has changed with the company then dont let the fear of turning a loss turn into a bigger loss grip you because stastically it favours a turnaround and what your experiencing right now is really just a correction which will eventually come back to its original levels.
Are you a trader or an investor - You have dismissed all of your TA for a fundamental reason.
Have you even seen a defencive game in football. You can sometimes know the first team that cracks will lose the match.
It's not just developing your systems it is also about developing you. So you don't crack and disregard your system. It ends up a case the system/plan needs work, you need work or they both need work.
I've backtested nmpteen times with confidence but ever since starting my trading adventure on the 9th of last month I've made around 30 odd trades and have made losses of over $6000 in the past 3 weeks........
I've been through ..absolute massacre from the markets as its see- sawed its way to squeeze my shorts one day to turn around and dead cat bounce my longs then turn around again to squeeze my shorts before going back the other way after I'm out at my stop loss.
So what do you think entry needs work, stops need work or the market is crazy, time to sit out for a while.... Ingots list is just great to review after your trades.
When I realise a system didn't work in the begining I threw the whole system out rather then just improving parts of it. I felt like I learnt more by commiting myself to the way I wanted to trade an through trail and error slowing kept improving it.
Wish you well
(Message edited by Tbreak on August 05, 2007)
(Message edited by Tbreak on August 05, 2007)
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rockon
Member
Username: rockon
Post Number: 196
Registered: 08-2003Rating: N/A
Votes: 0
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| | Wednesday, August 08, 2007 - 03:23 pm: |
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Hello All,
When I first read the original post, I was tempted to offer my humble opinion on a few things, just viewed from a different angle which is sometimes all it takes for a poster to see another way round their problem.
Then I remembered that this one seems to be very similar to others in the past. Has anyone noticed that occasionally what seems like a genuine request for assistance turns out to be nothing more than someone "milking" information.
I know that any opinions or offers of help are only of a general nature and aren't really a threat to national security but if one reads these original posts carefully then similarities begin to appear.
Firstly I have noticed that although the questions are of a learning nature, the writer seems to be far more educated than what others think by the quality of some of their post.It struck me with this latest guy that apart from his problem, he had really done his homework on his trading/investing enterprise. I would have thought that changes to his exit criteria and subsequent changes to his rules were part and parcel of building a good system.
Other similarities like very little or no other involvement in discussions after initial post and in particular, not asking posters to explain what they have just written as some of it can be a bit boggy.Another thing that annoys me is that when the thread has run its' course there are no thank-yous' or any sort of acknowledgment from the original poster for some of the solid advice /opinions which they asked for.They simply disappear.
I will be the big Five-Ohhhh this weekend so maybe I am turning into a grumpy old  or maybe its just my suspicious mind, so if everyone else thinks that this a load of piffle then I'm cool with that.It's just that I get the slightest inkling that these enquiries are possibly from one and the same person whose motive may be more than educational.Possibly a budding awther. who knows?
Cheers before the arthritis kicks in.....R
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ingot54
Member
Username: ingot54
Post Number: 1897
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Wednesday, August 08, 2007 - 06:13 pm: |
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NOTHING HAS CHANGED
In the story below found on the Internet, a tale of rare gratitude unfolds.
I certainly can not pontificate on the actions of others, but Rockon has a valid point.
Perhaps Dojistar is still quite upset and hurting - disillusioned - and has not logged on to see the help freely offered.
I am still willing to help Dojistar.
From the Gospel according to St Luke 17:12-19
It happened that as he made his way toward Jerusalem, he crossed over the border between Samaria and Galilee. As he entered a village, ten men, all lepers, met him.
They kept their distance but raised their voices, calling out, "Jesus, Master, have mercy on us!"
Taking a good look at them, he said, "Go, show yourselves to the priests." They went, and while still on their way, became clean.
One of them, when he realized that he was healed, turned around and came back, shouting his gratitude, glorifying God. He kneeled at Jesus' feet, so grateful.
He couldn't thank him enough — and he was a Samaritan.
Jesus said, "Were not ten healed? Where are the nine? Can none be found to come back and give glory to God except this outsider?" Then he said to him, "Get up. On your way. Your faith has healed and saved you."
Stories for Survivors: Thanks!
Context:
In the story of the ten lepers, Jesus encountered a Samaritan leper. The Samaritans were a group of Jews who had intermarried with foreigners. They were hated by pure-blood Jews who could trace their bloodlines back to the original twelve tribes of Israel.
The hostility between the two groups was so great that Jewish travelers usually chose not to travel through the area where the Samaritans lived. The following story took place on Jesus' final trip to Jerusalem before he was crucified.
Life Lessons
Crisis often creates isolation. The ten lepers were exiled from society so that they would not spread their disease. They stood at a distance, asking help from Jesus. It is common for those going through crisis to feel isolated from others.
Outcasts "shout" to draw attention and gain help. The lepers stood at a distance and shouted for Jesus to have mercy on them. Outcasts are invisible to others unless they draw attention to themselves.
Crisis can strip people of their personal dignity. Those who contracted leprosy were considered "unclean" in society. A loss of health, finances, property, relationships, status, and so on can be a humbling experience.
Prejudice distances relationships. On this occasion, Jesus traveled along the borders rather than going through Samaria because of the hostility between the Samaritans and Jews. Prejudice keeps people from connecting relationally.
Be thankful to God for blessings received. All ten of the lepers had faith in Jesus' words and were healed. The Samaritan was the only one of the ten who showed gratitude and returned to thank Jesus for healing him. Thanking God helps us not to be self-centered.
A spiritual leader should be a pathway to lead broken people into community. Lepers who were cured had to first present themselves to the priests in order to be reinstated into their communities. Spiritual leaders are to be bridges that connect the hurting back into a healing community.
Keep Smiling - Don't look back
Trading style: Chartist Artist _ Breakouts and Shakeouts.
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dojistar
Member
Username: dojistar
Post Number: 2
Registered: 05-2007Rating: N/A
Votes: 0
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| | Thursday, August 09, 2007 - 12:18 am: |
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Howdy and greets to you ingot and others who have responded. I'm sorry for not responding sooner as I've tried to get away from anything to do with trading for the past week as you imagine I'm still burnt from the experience. And no to rockon I'm not fishing for info I really was in a precarious point last week and nearly crying at my computer at work when I decided to stop trading and when I made the post. Also it takes me a while to respond legibly as english is not my first language so please forgive me.
I'm really priviledge to have all your thoughts and assistance on helping me get myself around my battered and bruised state from the market forces. The day I posted this thread I contemplated quitting trading for good because I was so alarmed at the rate I was losing my hard earned money! My system backtesting showed an average drawdown of around 4K but this was over a few months not like losing 6K in under 3 weeks. I dont think I will quit just yet but I've withdrawn all of whats left of my trading accounts and put it back into my boring cash account while I contemplate what went so horribly wrong.
In the meantime I'm forcing myself not to trade for atleast another month so I can regain some confidence again and also restore some $ from my 'job' to reset my capital. The decision not to trade highlighted by ingot and spider is something I will now incorporate into my system. I've realised since my system is truly a trend based system and my timing unfortunately was ill fated | |
