I've been noticing a lot of threads from people that are, bravely, admiting they fucked up by blowing up their account. Firstly, I want to congratulate you guys. There is no shame in that, because it's part of the process for most successful traders. If you don't quit, you will learn a valuable lesson. I want to share my past with you guys when I first blew up my entire savings on a single trade. Prior to that, i also blew up another account during my college years. I figured if I can be a semi-pro in csgo (not that i was but i could have easily been), trading would be a similiar challenge.
Trading has never been easier. With a few mouse clicks, you are either coming out as a winner or a loser. Anyone can trade and anyone can get lucky. When you combine those two factors, we end up hearing stories of how someone on a subreddit of r/wallstreetbets is still holding on to a 2000%+ return from buying uncovered call options of Tesla or people holding bitcoin, hoping it goes to the moon.
Shown here are two different equity graphs. On the left side, we have Graph 1, where it indicates a typical trader on r/wallstreetbets. They oversize their long/short position and have very large drawdowns. Eventually, this trader ends up blowing their account. They also expect each trade to be a winner, or why would any normal person trade otherwise, right? It's a wrong mentality. All professional traders dont expect any particular outcome. It can be a winner or a loser. Their edge wins in the end, because they are profitable over a series of trades. They take trades without any hesitations or emotions shown. Graph 2 is how most professional traders equity graph looks like once they truely are aware of their emotions.
So when and if the trade goes in red, the following usually happens: They are frozen in fear and in result they are in able to think rationally. Every time the market goes in their favor, even for a split second while they are still in the red, they are convinced this trade will work out…eventually. Then, the market goes against their favor even more, so they are swearing to themselves that as soon as the market goes in their favor again, they will take a small loss. As they watch their profits bleed in red font, the market slowly goes in their favor. Their profits are still in red color, but it seems, now, the market is going back up to breaking even. I don’t need to take a loss. Who knows...these numbers might turn green. As they stare at the vibrant red font, representing their unrealized loss, they are not even paying attention to what is happening in the market. After waiting a grueling few more minutes, the market - without a single hopeful sign – never comes close to the breakeven point. In fact, it goes back lower than before. Now the trader can’t handle being in this situation. The amount of stress and uneasy feeling makes it too painful for them to hold on the position. They rather take the loss than ensure another second of this pain. So they end up closing the position just like that, and their mind is finally free from the burden of looking at the red numbers. Their mind is paralyzed. They don’t how to act, feel or even what to think. They wished it was a bad dream or could rewind back in time. Read this, ALL successful traders have been in this position before…ALL.
What happens if an average WSB trader keep trading just like the way they do a hundred more times? Will they blow out their account before they can finish making 100 hundred trades or come out just losing/making some money instead? My money is on the former. Or a better question would be: do you know want to be a consistent profitable trader or trade as if every trade will make you either broke or over-night filthy rich?
When I decided to invest full-time into learning how to trade, I made a lot of mistakes (ive lost my savings more than once) and encountered a lot of fillers. I didn't know what trading strategy worked best or which signals to follow. I couldnt even tell you what accumulation or distribution meant, let alone how they are formed. I remember in April of 2019, when Ethereum was around $100 - $180. I longed 241,000 contracts ~ roughly about 9 bitcoins at that time. I went to bed without having any stops. Next morning when I woke up, I immediately checked my email to see this message.
Words can’t describe how I felt. I was so sure that ETH would not visit $149 during that short time. I couldnt even function properly. I had no money to pay rent... it was so bad that I just wanted to sleep and be in a different world. I decided to stop trading all together by stepping away from trading in general for 6 months. I started to figure out how to become a consistent profitable trader as I worked my old job. After a year and half of just learning , I decided to trade again. Eventually i became a prop trader for earn2trade. I highly recommend to take a break when this happens to you. Adam Grimes also has couple of other suggestions from one of his books.
I highly recommend reading two books that helped me tremendously on how i saw the market: 'Trading in the Zone' by Mark Douglas and 'The Art and Science of Trading' by Adam Grimes. Adam Grimes has a free blog where most of his ideas are there for anyone inerested. Mark douglas has videos on youtube (highly watching all 4 parts): https://www.youtube.com/watch?v=QgaTlTfQnZI
Until then, stay strong and chin up.
Edit: Some of my fav. Mark Douglas' quotes (not in any particular order). He was a great trading coach for a lot big traders back in the day.
When you achieve complete acceptance of the uncertainty of each edge and the uniqueness of each moment, your frustration with trading will end.
When you genuinely accept the risks, you will be at peace with any outcome.
When you really believe that trading is simply a probability game, concepts like right or wrong or win or lose no longer have the same significance.
Why do casinos make consistent money on an event that has a random outcome? Because they know that over a series of events, the odds are in their favor. They also know that to realize the benefits of the favorable odds, they have to participate in every event.
No man ever reached to excellence in any one art or profession without having passed through the slow and painful process of study and preparation.
The typical trader doesn’t predefine his risk, cut his losses, or systematically take profits because the typical trader doesn’t believe it’s necessary. The only reason why he would believe it isn’t necessary is that he believes he already knows what’s going to happen next, based on what he perceives is happening in any given ‘now moment.'
It’s the ability to believe in the unpredictability of the game at the micro-level and simultaneously believe in the predictability of the game at the macro level that makes the casino and the professional gambler effective and successful at what they do.
Rarely will the typical trader stay with his system beyond two or three losses in a row, and taking two or three losses in a row is a very common occurrence for most trading systems.
If you can learn to create a state of mind that is not affected by the market’s behavior, the struggle will cease to exist.
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