As I watched my only current futures trade go south on me yesterday, I realized that this presents a unique opportunity. I am currently in the worst losing streak of my 20+ year career in terms of just raw wins and losses. However, many of these trades are very small losses. This is so important, keep your losses small. This is likely to be the worst losing streak I will ever have as a trader, so I am actually excited that I have not lost a devastating amount. I typically trade at about a 65% level of accuracy. This has been consistent for awhile now. At this point when I exit this trade on Monday for a small loss I will have 9 consecutive losses, a statistical anomaly with a winning percentage that high.These are the types of streaks that wipe out ultra aggressive traders who do not have tight risk control. This is a case study on how you HAVE to manage your money.
The unique opportunity is sharing this openly in a blog and how I am handling it. In addition, what I am doing to try and break out of this streak.
First, you have to remain confident in your approach. It is so easy to be confident when things are going great, it is entirely another to be so during a stretch like this.
Second, review every trade you do. I print them all out and keep them in folders, so I can always go back and review them post mortem. At times this is very helpful. I have found a few things I could have and should have done differently here, so that would have saved me some anguish here.
Third, make sure your method is sound. This obviously ties into point #1. It is one thing to be confident, but your techniques must be sound. Review what you are doing to make sure how you are approaching things is sound. If your approach is flawed, no amount of confidence will make it successful.
Four, the glass is half full. Assuming you have had good stretches, look back on them and feel good about what you have accomplished. Drawdowns are part of this, so that is something that must be accepted. In spite of this 9 loss streak, the drawdown is still under 8% which is fantastic.
With all that being said, lets look at what caused this on my part. I mentioned I am trying to change to hold things longer. Many of these trades during this streak were wins had I exited them in 2 or 3 days. The wins would have been small, and that is why I have chosen to use trailing stops with them in an attempt to capture larger gains.
If we look at that Cattle trade above, you can see there were 3 straight up closes after I entered. I typically exited trades after 3 wins when against the trend in the past. This would have been a 5k profit in this case. I have chosen to use a 3 bar trailing stop, which is why this trade will be a small loss. I was trying for a target of more than double where we went to, so it was not even close to getting there. We are setting up another buy opp, so it is possible I will get stopped and re-enter this the very next day. This does not mean I should move my current stop down. That is again a mistake people often make, hanging on to something too long. This is how losses get out of hand. You establish your parameters for how you will manage a trade prior to going into it. Then you follow those rules period. My parameters were to go for a particular target, and use a 3 bar trailing stop, so that is what I will do.
I am sure some readers who just happen by here will leave now that they see I have admitted to having this bad streak. Good riddance. So many are just looking for the short cut, the holy grail. They think they can make millions off 5k. This has been done, but rarely, and you will not learn how to do that here. The whole purpose of this blog is educational, an attempt to help others from what I go through day in day out trading. This current losing streak is a reality of what can happen, people need to be aware of this aspect of the business.
Sorry for the lack of market analysis, it is my blog so I get to determine what I talk about. I do not see anything setup so strongly that I am looking for any reversals of this weeks action. I think we will continue upward in most of these markets this coming week.
Have a great weekend