It has been a while since I posted a piece on trading psychology but I have been experiencing some issues in my own trading recently that I wanted to discuss.
I wrote an article in early October about the challenges of finding a trading system that balanced a purely mechanical approach with a discretionary one. At the time I was aware that my trading system had become too discretionary. This discretionary approach meant there was too much emotion involved in my trading, which had subsequently led to issues with ‘pulling the trigger’.
Over the last couple of weeks, I’ve noticed that I once again I have problems pulling the trigger and following the plan. This time however there are other reasons which I wanted to talk about.
Leaving the Attic
As some of you may know, I live in the attic of my family home. My two kids and their mother live below me. Check out my first ever post for some more details. Over the last year, my relationship with their mother has been challenging for both of us – we don’t hate each other, but we’ve grown ever further apart to the point were it’s almost impossible to share the same space for any length of time. So I’ve decided it is time to find a new home for myself and one where my children can call home every other weekend.
This situation has taken a lot out of me. I think I may even have a stress related illness (and I’ve never ever had a problem with stress before!) – so clearly my body is telling me something. Consequently, trying to analyse the markets on a nightly basis has been hard and making informed trading decisions has been even harder.
I’ll be moving out over Christmas and onto the next chapter in my life.
Moving Jobs
I will also been moving jobs in the early part of 2010 – Same company, but different role. Leaving my team and starting something new is also playing quite heavily on my mind. Another reason to be distracted from the markets.
A blast from the past
Whilst all this has been going on, I recently bumped into an old friend who I had not seen for over 2 years. I’m not going to go into too much detail on this one (there are some things I need to keep close to my heart) – but this situation has affected my ability to concentrate on the charts…..
So where do I go from here?
Well first things first. Concentrating on trading is almost impossible at the moment so I plan on taking a break until such time as my head is in a better place.
I will use this opportunity to really nail down my swing trading strategy. I also have plans for the website, so expect further changes. I’m also currently working on writing a book (about trading) so I’ll give myself sometime to focus on this.
Perhaps more importantly than anything however, I’m going to make sure I have a great December with my family and my two beautiful children before I finally close the doors to this Attic and start afresh in a place I can call my own.
I will however be looking for a place that has an Attic – I’m quite keen on my persona and besides DiningRoomTableTrader sounds pretty shit right?
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I really enjoyed this post – it was your initial post & pictures about moving into “The Attic” that endeared you to me. Sounds like things are happening for a reason; the trading part will work itself out. Hope you post/update and share view of new place. Best to you.
Yes, seconded. All the best to you, although I do hope your book has something to differentiate it from the others! Not an easy thing to do, writing a book about anything, especially something like trading. The personal stuff all sounds good though – moving on for all the right reasons.
All the best,
Steve.
Thanks very much to both of you for your comments. I will certainly be sharing my experiences over the next couple of weeks and will post some pics of the new place.
Good luck I’m sure you will do fine wherever you end up. Writing a book though huh, whats it going to be structured around?
Thanks Stocks,
I’m looking forward to it. A new year – a new chapter!
The book is going to be a trading diary – similar to the blog, focused on my experiences trading a 10K account. It will include chapters on strategy design, money management and of course, my favorite topic – trading discipline.
I have interest from publisher, so now I need to get my head down and start writing!
Hi, Daniel, hope you enjoy your time off and come back some day. I look forward to seeing the pictures. Definitely keep this website up and running because yeah dinningroomtabletrader does suck. Cheers and all the best to you!
I will certainly be back Mao – I’m only taking a short break in order to move house and re-establish my base! I do find when my mind is focused on other things, that my trading is incredibly hard to focus on. Probably a sign that the system still requires too much discretionary input.
The new year will signal the re-birth of an invigorated AtticManTrader
Hey Atticman,
I saw your video on the moneyshow and have been following your blog. I’ve been in the same boat as you throughout my progression of trading. I started this Feb 2009 (coicidently) towards the bottom of the market. The last 10 months have been great, but of course the monster rally attributed a lot to that.
I likewise have a fulltime day job as well, so day trading is not an option for me, plus day trading typically deals with razor thin margins often times, so I feel like I have to take more risk with larger doses of cash to make gains. Also I don’t have the biggest account out there either ($30k USD), but I don’t use margin at all.
Anyways, I’ve also been struggling with a swing trade that I can let run for 2-5 days which is my ideal trading time, long enough to manage part-time with work, but still enough to make profits to trade.
My trading software does not have the Keltner channels, but has most basic other trading options though.
Is there something by chance you could recommend me to try that might make sense ? I saw that you were doing the 8 EMA vs. 28 EMA crossovers then taking positions accordingly, then putting a preliminary 2% stop-loss. I think I am putting my stops @ 0.5% way too tight. Now that the market is for real and not just a non-stop train upwards, I really have to adjust accordingly.
Anyways, just thought I’d ask b/c I am in the same boat as you and I love trading, but I am having a hard time figuring out what to do now that the dynamics are much different, esp going into the new year.
-Mike
Hi Mike,
Thanks for the post, I really enjoyed reading this one. You do trade in much the same way that I trade. It seems as though your strategy works well in a trending market, but as the market starts to chop, your stops are too close.
How do you define the overall longer term trend of the market? Personally I use the weekly FTSE100 index. If the market is above the 8 and 21EMA then I predominantly look for long trades. If the market is below the 8 and 21EMA then I’m looking at shorting opportunities. If the market is chopping, then I’ll look to increase my stops (still a max of 2%, but I’ll buy less stock) and trade in exactly the same way.
It appears to me as though you trading strategy is a Trend following system. Most trend following systems have less than 50% winning trades. The key to their success is that the winners are far superior to the losers. If your system has been back-tested against all market conditions, then you will have a fair idea as to what these ratios are (W/L, Av Winner/Av loser). A combination of those ratios is used to calculate a really useful ratio called ‘expectancy’. ([% winners * Av win size] – [% Losers * Av loss size]). If this ratio is greater than 1, then over the long run, you should expect your system to perform in all market conditions. If that is the case, then you simply need to keep following the signals and trusting in your methodology. This sounds MUCH easier than it actually is!
You could also consider developing a different trading strategy that works on choppy markets. You might like to reduce the time frame (1-2 days?) and consider a system that looks at making smaller gains. For example there are theories to suggest that during periods of chop, markets oscillate above and below what is called ‘fair value’. If you were able to draw a Keltner Channel either side of a choppy stock, you would see that the stock would invariably reach the upper channel and then reverse until it hit the lower channel, before bouncing back up to the upper channel.
Thanks for the post and please drop me a line if any of the above requires more explanation.
Cheers
AtticManTrader
Just came across your blog. Ilove your articles around the elusive subject on Psychology. Keep the blogs up – I will be tunning in.
Being a day trader like yourself I find the trading mindset a tricky subject to master
Bhavesh
http://www.tradefxlive.co.uk/blog
Hi Atticmantrader, I’ve been following your updates with interest on Twitter. I hope the new job is going well, best of luck for your trading and other ventures in 2010.
Cheers
Tim
http://www.eminifuturesblog.com/
Hi Bhavesh and Tim,
Thanks for taking the time out to post on the blog. The move into the new flat is now complete (I’m going for a Feng Shui minimalistic approach to furniture – oh, ok, thats right, I have no furniture as yet!). But glad to have finally made the move.
I’ll begin posting blog entries shortly – infact I’m planning a couple now, one of which will address yet more of my findings on the psychological aspects of trading – A particularly poignant post given the last couple of weeks.
AtticManTrader
Hi Atticman,
Thank you for writing back to my earlier post. My trend trading strategy has been not working too well since the market has been somewhat choppy, so I shorted my EMA to 5 and 8 instead and looking for more compelling bullish/bearish crosses, so there is a quicker response time. As basic as it sounds, I have not done a win/loss analysis and breakeven as you described earlier and have begun to start that as well.
My charting software does not have Keltner channels so I am not exactly sure how they work. How are they different from a Bollinger Band 2 standard deviation and 20 period EMA ?
Thanks again for your help/time and best of luck to you in the new year.
-Mike
Good luck I’m sure you will do fine wherever you end up. Writing a book though huh, whats it going to be structured around?