Taking long Breaks

I recently discovered this site. This being my first post, I'll share my story with everyone. I will ask my question after.

My trading history starts with penny stocks from around 2002 until a few years ago. I lost my butt(thousands) and learned a lot about myself. A year ago I discovered FX and have fallen in love with the many advantages it has over other markets.

I have blown my account 3 times in the last year. First, I deposited $500 and lost it THAT DAY (totally gambling, no clue). I studied a few months and had some luck in a demo account, then dropped $1,000 in a live account. I lost that in a week, so making progress, lol. I placed $400 back in the live account after a lot of reading, studying, and working methodologies. This is the longest I have lasted but finally blew it after about 5 months. I'm down to $12.97.

I'm battled my addictive, gambler's personality and feel I have made significant progress these past 5 months. The best thing I did was erase every indicator from the screen. I now trade with candles and trendlines only. I truly feel that I have found my system and currently in the process of proving it out. If I can bring my $12.97 back to $100, I will refund my account.

Thanks for reading and hope you enjoyed my story. Now for my simple question:

I am in the process of appyling with the Navy, and supposed to get a yes or no TODAY. Since I am working through a new and hopeful system, I will may be leaving for bootcamp within a few months.

For those of you that have been trading successfully and taken long breaks, do you find it difficult to return? Is it hard to get back in the grove?

TIA,
TOdd

Here's my experience. I took up a Forex trading course in January. Traded with a demo account using what I thought was my proprietary strategy till June, when I opened my "live" USD3,000 account with MIG. There I was, never growing my USD3,000 beyond USD4,000 on demo, yet taking the plunge into trading "live" with a half-baked strategy.

I lost USD900 in my first three days. Went back to demo, came back to "live" a month later, and lost a little more. I went back and forth a couple more times, till where I am now. My account is now down to USD800, but I'm also a lot wiser, and know what I should do and should not do.

I do not believe in funding beyond your first account. Stick with that one account, and grow your balance. Yes, each time you lose, it's harder to climb back up, due to the smaller lot size. But that's the correct way to do it. If you always do top-ups, you will never learn to respect money and the market.

I think it is important to do something that reinforces discipline when you are on 'breaks'.

I would suggest readidng some great trading books, this would help you reinforce disciplne and also get you motivated again.

Good advise! Not sure I will be able to in bootcamp, but training will be no problem. There are a couple I have in mind

EXOTIC -
Thanks for sharing! Yes, I have been working towards building capital back up and it will take tiime. My account is bottomed. I can TOTALLY relate to your logic.

The reading doesnt re inforce discipline if discipline never existed. Unless you are really honest about what your expectations are then you will continue to gamble.

It is all to common that the vast majority of loosers here fail to acknowledge that the reason they have lost is that there expectations were far to high, and even if they dont want to, the results of over highly exposed trades sums up those expectations. The truth is, and it took me a while to admit it to myself, is that we all want to be rich and have trading remove all the problems of budgets and bills, however we think that we can do this by starting with nothing and believing the BS that it is possible.

My story was about 5 years ago after doing a course on trading forex. The most compelling part at the time was that at just 60 pips a week I could turn 2.5K into over 250k in a year by risking 'only 5% per trade and having a maximum SL of just 20 pips'. It seemed very simple to do with some catchy charts that illustrated 'exactly' what the presenter wanted, and that was the ideal trade setups that worked for the spreadsheet. It wasnt until late last year that I removed myself from the thinking. I mean 2.5K to 250K would be great, but you would have more chance of winner the lotto by investing the 2.5k into lotto tickets every year.

Discipline is something that happens when you have a paradigm shift, a moment when you truly realise that your outlook, perspectives and dreams are a folly based on reading the wrong things.

Razor

Todd, I personally believe that most traders over trade. Remember all you have to do is have a positive % day. I personally take no more than 1-3 trades a day on my live account.

Sure you won't have a positive % day everyday, but if you can reach your short and long term milestones you're on your way.

Here's an article I ran across from Jeffrey Kennedy.

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Source: http://www.marketoracle.co.uk/Article15652.html



Why Do Traders Lose?

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, 'How do you stop the Hand?' Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.




Fatal Flaw No. 1 – Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.




Fatal Flaw No. 2 – Lack of Discipline

When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.




Fatal Flaw No. 3 – Unrealistic Expectations

Between you and me, nothing makes me angrier than those commercials that say something like, "...$5,000 properly positioned in Natural Gas can give you returns of over $40,000..." Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.

Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.



Fatal Flaw No. 4 – Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.

All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month ... I promise.

I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: 'Aim small, miss small.' I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small."





Fatal Flaw No. 5 – Lack of Money Management

The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% - 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.

Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).

To overcome this fatal flaw, let me expand on the logic from the 'aim small, miss small' movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.




Break the Hand’s Grip

Trading successfully is not easy. It’s hard work ... damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.



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The article above was written by Jeffrey Kennedy.

Jeffrey Kennedy is the Chief Commodity Analyst at Elliott Wave International (EWI). With more than 15 years of experience as a technical analyst, he writes and edits Futures Junctures, EWI's premier commodity forecasting package.
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Just a word of warning, you will NOT be allowed to take anything with you to boot camp, not even a suitcase. Just the clothes on your back and if you are lucky they may let you bring a light jacket. Also, as a side note, you dont want to stick out too much or the RDC's will give you more shit the first 48 while you stand in line after line, be well rested and well hydrated and dont lock your knees!

What rate are you going for?

I have found that I have come up with some great trading ideas while on short breaks (a few weeks while I travel). Once you get out of boot camp and you go to your A school you generally will have a tad bit more freedom to study the charts and read books of your own (I recommend Tharps Trade Your Way To Financial Freedom).

Hope this helps some!

your story is same as like mine so i really understand what you trying to say,even i have removed all the indicators the only holy grail i hold for my self is.

I,ME,MYSELF

First of all, I didn't expect so many replies. This site is amazing since the amount of participants are willing to share advice and wisdom.

Thank you!

Razor, I am currently experiences the "shift" in discipline. No doubt it will be an ongong effort, but I am in route! Thanks you for your story and insight.


gulfcoastpip - "Todd, I personally believe that most traders over trade. Remember all you have to do is have a positive % day. I personally take no more than 1-3 trades a day on my live account."

Well, the current system I am working on gives maybe 1-3 per week, so I concur. Over trading is easy to do; we all want to rush into the next move. I am VERY impatient when it comes to the market and this has been a major downfall for me over the years. I am making progress, but thank you for pointing this out. In addition, thank for the article. I saved to to read occassionaly as a reminder.

TraderJ - thanks for the reading recommendation (i wrote it down). What rate am I looking for? I suppose you mean rate of return??? This is hard to say. I get few set ups per week and still in the testing process. It will be a few months until I can give an accurate estimate.

Swingtrader - Yes, I think you found the grail. It's been six years of blaming the markets, MMs, and anything else but myself for failure. I've finally come to terms that the reason for my past losses are my own faults. When I stop gambling, stick to a plan, and patiently see the plan through (discipline), my account balance soars.

Once newbs are comfortable with reading price (bar or candles), identify trends, and create a trading method there are no reasons for long term failure outside of the oneself.

Thank you everyone for your input to this thread.