Do times like these breed better traders?

[jeflin]

Most "traderz" get started when a bull market is in full swing. Their "skillz" rapidly become over-rated in their own minds, so they are completely unprepared for a bear market.

Their "skillz" include buying on dips and catching falling knifes.

After all, these "skillz" worked in the bull market.

Their "skillz" do not include playing the short side of the market.

But what about those that get started during a bear market? In my view, one of the very best things about a bear market is that incorrect trading behaviour very rapidly leads to negative consequences. This is not always the case in a bull market.

As they say, a rising tide lifts all boats. Any stock which report increase in earnings will have their stock prices driven up aggressively. Even a company with no earnings or cash flow can be a hot favorite if they tell a good story. Under such circumstances, how hard is it for a trader to outperform the market?

In a bear market, discipline and patience are needed, qualities which most traders lack.

 

[tech/a]

As Michael opened this thread I was hoping he may have been able to add more than generic input.

Michael simply states

Everyone can get themselves in a position to take advantage of this trueism. It's STAYING in that position that's the hard part.

I agree BUT

90% of people here including myself know how to cut losses and let profits run.
But when you find yourself in Drawdown 18% (On a sizable account) and slowly bleeding to death--I'm interested in what others have you done (Practically) or found thats made trading profitable again for you?

Around 2 mths ago I stopped trading.
I was bleeding to death and paying handsomely for the privilage.
I identified what it was that I was doing day in day out and expecting a different result and I know I'm not alone!!---then what needed to be done to correct it. So I could implement the "cut your losses/let your profits run"---without bleeding to death.

Putting myself

in a position to take advantage of this trueism. .

I found 2 fundamental errors--frankly very dumb stupid errors.
That also allow me to

STAY in that position

But before I put up my findings I was hoping for some from others particularly Michael.
It maybe that as a systems trader Michael has no input for those trading in a discretionary manner.
However I will say what I have found applies to all.
Much easier to apply for discretionary traders though.

Its certainly working with 2 trades 12 days old pulling back 14% of that drawdown.

 

[jersey10]

As Michael opened this thread I was hoping he may have been able to add more than generic input.

Michael simply states



I agree BUT

90% of people here including myself know how to cut losses and let profits run.
But when you find yourself in Drawdown 18% (On a sizable account) and slowly bleeding to death--I'm interested in what others have you done (Practically) or found thats made trading profitable again for you?

Around 2 mths ago I stopped trading.
I was bleeding to death and paying handsomely for the privilage.
I identified what it was that I was doing day in day out and expecting a different result and I know I'm not alone!!---then what needed to be done to correct it. So I could implement the "cut your losses/let your profits run"---without bleeding to death.

Putting myself



I found 2 fundamental errors--frankly very dumb stupid errors.
That also allow me to



But before I put up my findings I was hoping for some from others particularly Michael.
It maybe that as a systems trader Michael has no input for those trading in a discretionary manner.
However I will say what I have found applies to all.
Much easier to apply for discretionary traders though.

Its certainly working with 2 trades 12 days old pulling back 14% of that drawdown.

As a novice, i find the idea of 'changing' the way you trade based on recent trading form a bit of a grey area. At what point do you decide you are going to stop trading or alter your trading? Tech, as you say above you stopped trading 2 months ago. My question is, if you were trading a system that has a positive expectancy, which no doubt you would have been, at what point and why do you stop trading?

To relate this to my own experience, i recently started trading the ASX power setups on the Chartist. My trading account is currently slightly down. I don't care. As the power setups have a proven positive expectancy over many trades (and caters for both long and short orders), theoretically shouldn't i keep trading the power setups until my account balance is at $0? Practically this would never happen, but in theory the question i ask is at what point is it a good move to alter / stop / tweak / add a trend filter to your trading system / methodology and at what point is it just a psychological deficiency that causes you to stop trading or alter a good trading system with a positive expectancy?

 

[tech/a]

My question is, if you were trading a system that has a positive expectancy, which no doubt you would have been, at what point and why do you stop trading?

I actually stopped trading my longterm systems (I had 3 going) back 14 mths ago.I stopped as I believed there would be a major correction---I over rode my system.
My open equity was sizable,I personally didnt wish to place that at risk.
You could say I closed my trade.
For ME it was the right thing to do and I'm happy with the decision.( I have sold houses after holding them for a period as well).

From there I have traded around 20% of that account in a discretionary manner
My stopping of trading was for 3 weeks--- 12 days ago.
Positive expectancy--well as the market altered it went from positive to negative.Its discretionary so I havent tested the method.However the REASON why it would be positive remained intact and still does.
As it turned out I lost focus of the basics--became complacent--thought it WAS really THAT Simple.

Which it can be---if you dont become complacent.

 

[noirua]

This is a really interesting point IMO, because ´traders ´ just trading off TA, miss the really undervalued stocks that were frequently identified by the likes of YT and get their few % gain here and there. I saw YT make quite a lot of money from picking undervalued stocks and then jumping out as they came close to his interpretation of fair value. Or a suitable gain, whatever that was. Perhapsd up to a FA or TA level. There is a case for picking fundamentally undervalued stocks and then playing them by TA, to make quite a good deal out of the market. But as MichaelD, tech, and others (sorry to leave a good trader out) keep telling us, it ´s the selling and money management that keeps you in the game, especially at a time like this. Selling is almost like putting in golf. Buy for show and sell for dough...

Sorry if that didn ´t make any sence...

In the end it takes a stick of dynamite to make us sell at times.
Selling has always been my weak point and keeping 70% to 80% of my portfolio in cash or short term fixed interest stocks, has been my saviour this time.
Never mind all the work put in checking on stocks, it's knowing our own faults that helps in the end. Afterall, when the big bear strikes even the greatest stocks fall.

How could a dot com genius, he called himself, who made $50,000 a week eventually lose almost everything.
He forgot his day trader rules a bit, sell out before the days over, always. Unfortunately the computers crashed and left most day traders with stock, and when the market opened the next day it was at prices about 20% down. So he hang on for the expected bounce, THERE WAS'NT ONE.

 

[MRC & Co]

In what way did you alter your trading tech? If you had a pre-defined trading plan, were you taking set-ups you wouldn't normally take or exiting differently? If it is purely discretionary, then how exactly would you know you became complacent?

Jersey, to answer your question, you wouldn't keep trading your account down to 0%. Just like you have a stop in a trade, you should have a stop on your account. A point at which you start paper trading and analysing your methods (are they not suiting market conditions, are you not following your trading plan etc), until your equity curve becomes positive once more, then you can return back to real money. You can also slow down your position sizing faster than simply through fixed fractional.

 

[BBand]

Become a better trader?

May be the problem is the timeframe that we are trading, not that our "setup" has stopped working, or does not have enough trades to make it work, gets stopped out frequently etc, etc

In times like these, as a trader, we should operate in the arena that offers frequent opportunity to trade our preferred setup and offer an acceptable return.

Remedy?
Move down a timeframe (or more), you may be pleasantly surprised with the opportunities that become available

The problem then may be that your average profit is much smaller than usual, but we can only have what the market offers and be grateful

Always checkout the underlying structure of your intended stock (Elders Triple Screen - multi timeframes)
Be patient
Only select trades which you are most comfortable with (having a high probability of success)
Be consistent

You don't have to trade every hour/day/............

Its your money thats at risk
ALWAYS TRADE IN YOUR OWN BEST INTEREST

Peter

 

[noirua]

Having read a lot of posts on this thread. I find, that most of the theories fall flat when almost every stock in the market tanks.
What is your theory of investing as there becomes a greater need to short?

 

[CanOz]

Become a better trader?

May be the problem is the timeframe that we are trading, not that our "setup" has stopped working, or does not have enough trades to make it work, gets stopped out frequently etc, etc

In times like these, as a trader, we should operate in the arena that offers frequent opportunity to trade our preferred setup and offer an acceptable return.

Remedy?
Move down a timeframe (or more), you may be pleasantly surprised with the opportunities that become available

The problem then may be that your average profit is much smaller than usual, but we can only have what the market offers and be grateful

Always checkout the underlying structure of your intended stock (Elders Triple Screen - multi timeframes)
Be patient
Only select trades which you are most comfortable with (having a high probability of success)
Be consistent

You don't have to trade every hour/day/............

Its your money thats at risk
ALWAYS TRADE IN YOUR OWN BEST INTEREST

Peter

I like this...i just wish i could trade intraday. I believe there are opportunities there in all kinds of markets. FX for example cares not that there is or is not a recession looming.

Great points Pete.

CanOz

 

[MRC & Co]

Having read a lot of posts on this thread. I find, that most of the theories fall flat when almost every stock in the market tanks.
What is your theory of investing as there becomes a greater need to short?

Of course you have to trade a bear market. Investing becomes a dangerous game, as you said yourself, you need to short. If even to hedge broader market risk.

As BBand says, high frequency, shorter term trading.

Though Michael disagrees and uses a trend following system, but not sure how large the profits would be if this bear market lasts a couple years or more........

Canaussie, if you have success trading EOD, then you can trade intraday. Just use something like IB, which has fast execution speeds and low comms. If you have to work, trade Europe afterwards etc..........

 

[noirua]

Of course you have to trade a bear market. Investing becomes a dangerous game, as you said yourself, you need to short. If even to hedge broader market risk.

As BBand says, high frequency, shorter term trading.

Though Michael disagrees and uses a trend following system, but not sure how large the profits would be if this bear market lasts a couple years or more........

Canaussie, if you have success trading EOD, then you can trade intraday. Just use something like IB, which has fast execution speeds and low comms. If you have to work, trade Europe afterwards etc..........

In a bear market there is always the danger of going back in too soon. The warning signs are in the falls in major stocks even though they have booming profits and piles of cash. I suppose it's panic and forced selling that plays a major part.

Woodside Petroleum were under $1 a share in the early eighties and many got out in a panic. Were they right? I think we all know the answer.

 

[MRC & Co]

Yes, you can be a bottom picker if your good at it. Though I wouldn't devote a large part of my portfolio towards it alone, too dangerous for me personally.

But this thread is about trading, so I will leave the investing discussion there.

 

[tech/a]

Become a better trader?

May be the problem is the timeframe that we are trading, not that our "setup" has stopped working, or does not have enough trades to make it work, gets stopped out frequently etc, etc

In times like these, as a trader, we should operate in the arena that offers frequent opportunity to trade our preferred setup and offer an acceptable return.

Remedy?
Move down a timeframe (or more), you may be pleasantly surprised with the opportunities that become available

The problem then may be that your average profit is much smaller than usual, but we can only have what the market offers and be grateful

Always checkout the underlying structure of your intended stock (Elders Triple Screen - multi timeframes)
Be patient
Only select trades which you are most comfortable with (having a high probability of success)
Be consistent

You don't have to trade every hour/day/............

Its your money thats at risk
ALWAYS TRADE IN YOUR OWN BEST INTEREST

Peter

Ive been a great believer of trading R/R not profit.Infact my trailing stop nowadays is based on R/R.You find 3:1/5:1 etc R/R trades in all timeframes.

Peter I agree with your observation and something that I have personally done---however without the time to sit and watch a screen I found myself often being whipsawed out on pure daily noise.If you have the time sure.
Intraday slippage belted me a few times as well.

In a bear market there is always the danger of going back in too soon. The warning signs are in the falls in major stocks even though they have booming profits and piles of cash. I suppose it's panic and forced selling that plays a major part.

Woodside Petroleum were under $1 a share in the early eighties and many got out in a panic. Were they right? I think we all know the answer.

Very longterm in most ASX100 stocks you will profit--but those of us who wish to maximise our usage of our money dont wish to sit it there and not working.In my own case had I kept all longterm trades in the system open and continued to trade--15 mths later I would not now be in a drawdown.
So there is merit in this for sure.

To my solution
Looking back on all my trades it became obvious--to me at least what was wrong.

I firstly needed to trade medium term as that is the smallest timeframe time allows me.

(1) I wasnt in sync with the index and the stock I was trading,and by index I dont necessarliy mean the XAO.

(2) I wasnt waiting for the trade to come to me. I was forcing a trade before it was ready. Not a problem in longerterm trading but shorter it was a killer.---whipsaws---and slippage on stops.

Everything else remains the same (re analysis). Entry in the longterm has little relevance but in the shorter term can bleed you to death.

 

[noirua]

It depend whether you are trading almost blind or not. The old day traders I remember in the 1990's often had no idea what the stock they bought was.

Charting was coming in big time and it was a case of just watching where everyone was piling in and then desperately closing out later in the day. Over the phone, that was quite a trial at times. One trader, I remember, had started to go grey at 28 years old.

On the old Aussie website at stockhouse, now defunct, there were very many quite desperate posts when the dot-com collapse came. References also to some who took their own lives at the time.

Times like those show that no matter how good we are or think we are. The big bear can rip our arms off, in financial terms, at any moment.

 

[CanOz]

Canaussie, if you have success trading EOD, then you can trade intraday. Just use something like IB, which has fast execution speeds and low comms. If you have to work, trade Europe afterwards etc..........

Yeah its just a time thing for now, but i'm happy to just try research as much a i can now until i have the time that it requires.

Very interested in applying VSA with the help of my Tradeguider to intraday....someday.

Cheers,


CanOz

 

[nomore4s]

To my solution
Looking back on all my trades it became obvious--to me at least what was wrong.

I firstly needed to trade medium term as that is the smallest timeframe time allows me.

(1) I wasnt in sync with the index and the stock I was trading,and by index I dont necessarliy mean the XAO.

(2) I wasnt waiting for the trade to come to me. I was forcing a trade before it was ready. Not a problem in longerterm trading but shorter it was a killer.---whipsaws---and slippage on stops.

Everything else remains the same (re analysis). Entry in the longterm has little relevance but in the shorter term can bleed you to death.

I have also been having some similiar problems with my trading lately.

My entries have been killing me - as well as my exits.

My entries like Tech have been premature - didn't want to miss out, so what has been happening is that I'm getting stopped out and then the stock is taking off in the direction my analysis and my original trade. Very fustrating.

My exits have also been somewhat poor - have now begun taking profits (full or partial) at a target level, due to being caught out in this market a few times with trades hitting profit targets but running a trailing stop and end up giving up too much open profit.
Also have exited a trade early (for a small loss) with a tight stop only to see it shoot in the direction I was trading, whereas if the original stop was kept I would have still been in the trade.

The other problem I have been having is timeframe of the trade. I mainly trade EOD, but when I have taken trades lately my timeframe has been getting blurred - short, medium or longterm. This is of course having an effect on my exits and placement of stops. The volatility of the market has had a bit to do with this I think.

I lost sight of my trading plan & methodology(?), noob mistakes really.

 

[BBand]

I think many of us can relate to nomore4s situation in this volatile market.

When things are going well - its easy to stick to your plan - you're not losing money!

One of the ways that I find useful in resolving a trading problem is by taking time out to put all the relevant facts on paper (or screen).
This process makes me think about what I did before and during the trade(s)
By the time I am finished, I usually have the solution to my problem

I then update my trading plan accordingly

This may be a reason for traders who realise that they have a concern, to at least copy nomore4s post format, and hopefully have a better insight into what they can do to improve their trading, whether they "post" the outcome is up to them.

Thank nomore4s

Peter

 

[kam75]

The current market can certainly teach a thing or two. How to cut your losses short when wrong and that hope is a four letter word. To be a better trader, you have to discover your own unique edge and apply it consistently, at the right time, in your trading. I think this market can teach us all a lesson in patience, to wait for the right opportunities that fit your trading rules.

Regards
kam75
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