In this episode of 2Traders Podcast, Walter and Darren talk about what could be some of the possible issues for a trader who can make profit from good trades over a week and can loose them all in just half an hour. They discuss different factors that can cause this such as inconsistency, confidence, risk/reward management, and trading psychology. They also emphasize on the importance of acknowledging problems and finding ways to solve them.
Darren also shares some tips that can help you accept mistakes and how to avoid them.
Download (Duration: 16:28 /18.8 MB)
In this episode:
01:10 – jumping in too soon
02:58 – stray a little bit
04:04 – market condition scenario
05:21 – mental block
07:06 – off track
08:51 – snapshots
10:44 – watch the hour tick by
12:49 – reframing
13:23 – confidence booster
15:40 – don’t beat yourself up
The system looks like it’s making money for you because it does. [Click To Tweet].
You don’t get there by making the right decision all the time. [Click To Tweet].
It’s through experience and through years of making a mistake. [Click To Tweet].
Walter: That’s, I think… Sometimes what happens with me is I will see the candles start to print and think I know what’s going on and I’m almost always wrong. That’s something to think about as well….
Announcer: Two traders, Darren and Walter, pull back the curtain on profitable trading systems, consistent money management, and profitable psychological triggers. Welcome to the Two Traders Podcast.
Walter: Welcome back to the Two Traders Podcast. I’ve got Walter here and Darren is over there. I guess summer is coming to you, Darren. Slowly, slowly unfolding for you.
Darren: Yeah, we’ve got the heat and off in the UK now. It’s getting better and it’s a bit more livable .
Walter: Right. It must be time to leave then and time for another trip.
Darren: Yeah, you know it.
Walter: Awesome! Well, we’ve got some really interesting questions that are trickling through. I thought that this might be a good time to take a look at those and I think you’re in agreement. I’ve got this question here from a trader that comes through and actually highlights a couple of different points, Darren.
One of the questions is: “I’ve got this issue of jumping in too soon in my trades and being too inconsistent in my trading. I can go a week or two making money and then I lose it all in half of hour after that.”
I guess the question is, really, what’s going on here with this trader? What could be some possibilities? Of course, we don’t know exactly what’s going on but there are some clues in the question.
Darren: Yeah. It sounds like it could be a risk to rewards scenario, kind of trying to avoid any losses, taking very small wins and then one lost is literally wiped in a lot out. Maybe he needs to look at his risk/reward.
I’m not saying that sort of setup cannot work but you can’t take it to the extreme and just have like a naive set win rate if one loss is going to wipe your two weeks of profits out. That’s the first thing that jumps out of me — his risk/reward.
Walter: That could be a confidence thing. I don’t know about you, Darren, but what I’ve noticed is it’s really hard to fight this. There are things you can do but if you’ve had a really strong run of trades, you almost stray from what’s really got you there.
What I mean by that is sometimes what will happen is, you’ll find that when you’ve had seven, eight, nine winners in a row and you’re feeling really good about yourself. It doesn’t even have to be in a row, maybe eight out of the last ten trades were winners, two were losers but, those eight big fat winners really run up your account.
You’re feeling pretty good and it’s really like the guy who goes and puts money into the slot machine in a pace out. You just want to keep fitting money back in to get more money out. You’ll feel really good about yourself.
Sometimes you can stray a little bit from what got you there, that could be what’s going on. Another thing could be position sizing. It’s kind of related issue but what if this trader is taking a certain amount of risk on these trades that are winners then, all of a sudden, because he’s feeling so confident or she’s feeling so confident– we don’t know if it’s a she or a he — would say “okay, what’s going on here? Are you risking one percent and then finally now, you’re risking five percent?”
Something could be going on with either of those two things. It’s hard to say but, certainly, you’ve nailed it. It could be reward to risk which means that it’s kind of a mirage. The system looks like it’s making money for you because it does. You got these losers and then just knocks your way back.
If the risk/reward isn’t setup correctly and in conjunction with the win rate, it’s actually got a negative expectancy so it’s not going to make you money over the long run. That’s what’s showing up or it could be just a confidence thing or maybe you’re varying your risk on your trade. Something weird is going on. Any other thoughts on that?
Darren: Maybe. Or it’s a market condition scenario where his particular style of trading is working really well in one market condition but then, it’s in a ranging condition. He’s losing very heavily and you need to analyze market condition.
Pick the right condition to trading such as trend trading or you need a system that obviously doesn’t give all back when market condition aren’t favorable. You could possibly just go in off plan as well.
The best way for him to get to the bottom of it is to make notes about what occurred when he was winning, what’s different when he was losing and get to the bottom of what the real issue is. A bit of journaling will help him, I imagine.
Walter: Absolutely. Another thought popped into my head because I’ve known two traders who had this issue which is, they could build their account to a certain level and then everything would fall apart.
It’s almost like a psychological barrier where you’ve got this account — maybe you start at twenty thousand or whatever — you can build it up to two hundred thousand. As soon as you get to that level, something weird happens. It’s almost like a mental block.
The only real solution is to either discover that mental block, try to override it with something different or a work around which is really a sort of like taking a drug that makes the symptoms go away.
The other way to do it is to just simply keep building your accounts to two hundred grand and starting all over again, which is silly. That’s another way to do it if you’re not going to dig into psychology. That could be something as well. It’s probably less likely.
It’s probably more likely what we’ve been talking about. That could be where you have this amount of money and when you reach that amount of money in your account for whatever reason, you’ll feel like you’re not worthy of it or you can’t believe what’s going on. You feel like you’re not working for the money.
Something weird is going on mentally and that’s usually subconscious, usually hard to dig out but it can be done. That could be another piece.
Darren: One of the points that kind of grabs my attention is he talks about a couple of weeks of winning and then losing it in half an hour. That makes me think that he basically loses it completely.
Like you say, this goes in with the massive position or starts. Perhaps, he starts to have a loser and gets out and goes back in again then gets back out. Then he is like completely lost any sort of structure to his trading at all ‘cause there’s this sort of lose that amount in half an hour. It’s got pretty horribly wrong.
Darren: I used to do that all the time. Do trade really well for a bit and then I just get bored or something. I tell you now, the thing that used to always draw me off track was watching the charts.
If you can get away, especially if you’re trading a specific timeframe, really there’s nothing you need do in between the bars. If you’ve got a set of targets, then you can set a TP. If you want to trail your stop, you can do that automatically, as well. You don’t need to be watching the charts.
It’s so bad. I mean, if you’re having a bad time, you’re watching price moving, your mind makes so many assumptions that are completely off plan and not what you should be doing at all. If traders can do that, it certainly helps.
Walter: That’s a great advice. Actually, I caught myself last week– I’ve been trading the eight hours chart lately–what I caught myself doing was exactly that and I said “You know what, I’m not going to check my trades for a whole day and a half.”
It’s weird because it was the end of the week. When I say that, it was really I would check my trades when the market closed, basically. The last sort of London session I didn’t really watch and most of the Asian session.
It wasn’t really that much but I will say that I am in complete agreement. What happens I think is that, I could be wrong but one way to test it out for yourself is you can sit down and watch whichever your favorite candle is.
Let’s say it’s the four-hour candle or the daily candle, or even the weekly candle, whichever candle you like to trade — even the one-hour candle does works. Sit down and what you want to do is take six snapshots of that candle.
If it’s the daily candle, you take the screenshot everyday of the week. Write when the market opens and the rest of the week you take the screenshots.
What you’re trying to do here is show that what starts out as looking something in the beginning on Sunday or Monday. It looks like the market is going to do this but at the end of the week, it’ll look totally different.
Same thing with the four-hour — every half hour or so, you can take the screenshot. Or, the hourly candle — every ten minutes take a screenshot. See how different it is because it’ll blow you away.
To me, what I find myself doing is if I take a position — like for example, I took a position last week or two positions where I missed — I had the signal but I didn’t really want to take it during Asia’s so I kind of left it. By the time I got back to the charts, the market had gone so far in my direction.
I felt “Aww!” and London was really pushing it on the open and I thought “Jeez, I’ve missed this trade” as it is now away from the pullback, which is not something I normally do, and then once it pullback I got in at a pretty good price on these two trades.
Then, of course the next candle starts printing and starts totally reversing and going against me and I think “I should’ve waited for the pullback” then I think “Aww, this might even get stopped out”.
At that point, I said “What am I doing sitting and watching an eight hour candle print? This is insane”. So I’ll say “I’ll come back tomorrow morning and see what happens.”
It was all fine but that’s –I think sometimes what happens with me is I will see the candles start to print and think I know what’s going on and I’m almost always wrong. That’s something to think about, as well.
Darren: I think also, the times that it’s almost tempting to watch the candles forming when you’re glued to the screen and you’re literally watching the hour tick by. Those moments when fear and greed are really heightened. You find yourself doing that when you’ve had a losing period.
You’re in a trade again and you really need this one to win. That’s when you find yourself getting drawn into watching. The point you made about buying on a retracement, it’s really hard to do that, isn’t it? Really hard to buy when price is going down.
Walter: Yeah, exactly. In this case, it was selling when the price is going up but… Yeah, exactly. We were talking about this earlier. Let’s talk about how you… Because you bring up a good point, Darren, where you say you have these losers and you want to make it all back and that’s when the greed really comes in. You’ve got this trade that looks like it’s going to be a winner.
Last week, you had a bit of a choppy week and then at the end of the week you have a really good trade, or a couple of really good trades. So can you talk about how you manage that last trade?
I’m curious knowing that you had a rough patch at the beginning of the week and then to really sort of snatch victory from the jaws of defeat. How did you do that in terms of watching the candle, not watching the candle, managing that last trade? How did that unfold?
Darren: It was difficult because I ended the week with two positions short. I think the most, I was a hundred and seventy pips down for the week and I had two positions running short which was — when they were open — were about a hundred and ten pips, I think.
Obviously, my mind was racing. Do I just take them out? If I hold on, is it going to come back and down for the big losing week again? I worked on a structure of only making my exit positions at the close of the bar.
It’s taken a lot of time. I’ve practiced to get it to a stage where I could do that. I kind of use that in conjunction with always reframing. I’m always reframing whatever has happened.
If I’ve had a bad day, then I’ll go and look in my weekly data and if I’ve had a bad week, I go and look at my data for the year, just put it into context. Sure, I ended the week last week minus sixty three pips or something which is really good because we have five days which is agreeable to my style of trading.
To get through that and ended up sixty three pips is you take that as a confidence booster. Slowly but surely, all of that repetition of doing that, you get to the point where you just know.
What I want to do here was get out and I just want to take the hundred pips off the table. If it came back on me again I’d bear it in mind. I think I have like seven losers on the chart and then I was losing and winning a bit back and losing and winning a bit back.
I’ve really been through the mill so it’s quite reasonable to think “Okay, in this instance I should just take the hundred pips” and not wait for the bar to close. It was just through experience and through years of making a mistake like the guy who posted the question or girl who posted the question.
You’ve got to have a structure and you’ve also got to accept that it’s not always going to give you the best outcome, but if you reframe it and look at the big picture, then that’s where you get to consistent winning. You don’t get there by making the right decision all the time. It’s about the averaging out of the long term.
Walter: Yup. That’s exactly it. That’s why we can figure out what our expectation is from our system by looking at the average winner and average loser and the win rate. That’s exactly it.
To sum up, we we’re really guessing about what could be some of the issues for this trader who can stack a couple of weeks together then lose everything at once.
I would say, in some, the things to look at would be: are you risking a lot of money after you’ve built up your confidence? Is confidence an issue here? Is it changing the way you’re dealing with these trades? Is it something where you feel there maybe something going on psychologically?
A certain number that you can only watch your account get to before something like this happens? Overall, I would be saying it’s going to be either psychological or probably something in terms of your risk management. Somewhere around there, that would be my guess. Any final thoughts on that, Darren?
Darren: I’d say don’t beat yourself up about it too much. The fact that you can win is good but that obviously is something always going wrong and don’t try and find the one answer instantly.
Accept that there is an issue there, make some notes, and just go through a period of trial and error and refinement. Slowly but surely, you’ll get better at avoiding and giving it all back. Some of those will become winners and you’ll be consistent over time. Just give it time, really.
Walter: Great. Thanks for your time, Darren. We’ll see you next time.
Darren: Cool. Cheers, Walter!