How Should I Respond?

BellaMike Bellafiore's (Bella's) Blogs31 Comments

I received the following email from a consistent reader of SMB Blog.  As way of background, this developing trader is an accomplished musician.  And when I say accomplished, I mean 10/10 randomly selected people would know who this gentleman plays with (but sorry we are not giving away this info).  I would like to try something new on this blog.  Please read the email below and for those interested, post your advice to this developing trader.  Tomorrow I will offer my advice. 

Hi Mike –I wrote to you last week (the DNDN day) after I’d had a rip after a string of profitable days. I subsequently had four consecutive positive days in the 3-500 range. I was feeling solid.

I mentioned to Roy that since mid-April, when I discovered your blog and came to visit in NYC, I’ve had an about face in my trading. Not only was I positive 12 of 13 days, I was getting fee rebates because I was adding liquidity to over 80% of my volume. I made graphs in Excel of my days trades and they formed (mostly) steady upward trending lines. I looked to find my weak spots in the day.

Then, today, I lost it. My demons took over. I reverted to sloppy bad habits. I got big. I held losers. I was in multiple positions bigger than I should have been. I wanted so badly not to finish in the red, that I made things much worse. Today I did not behave like the trader I have been the last two weeks. It is a disgusting feeling. An overwhelming feeling of shame and waste.

I was just beginning to feel like I could see the light at the end of the tunnel. Not that I had mastered anything, but just by absorbing all I have from your blog, site, and approach to trading, I had made a turn for the better. And I hadn’t even started the training program yet.

I have this awful pattern: I work up small profits a few days in arow. I build on that. When I get up a certain amount in my account, I have a day where I lose it. My number 1 issue is not so much that I can’t make money, it’s that I can’t keep it.

I did so much wrong today, and to add insult to injury, the stock I lost the most in was MGM…and then I read the blog and realized I gave my money to Steve.

I guess if I’m leaning towards a question here, it is this: when you were in your first months trading and were down large, how did you finally turn it around?  Did you ever feel like it you couldn’t do it?

I am very much looking forward to learning from you guys. I feel like I can be great at this. But I was a disaster today it cost me. My last two weeks said I had promise. Today said get out of the casino. Thanks.

Best of luck with your trading! Don’t forget to follow us on twitter.

31 Comments on “How Should I Respond?”

  1. Overconfidence and taking on too much risk is a deadly combination. Kowing your limitations and limiting exposure are positives. Know how much you can lose before you enter any trade and stick to it, hope is not a strategy in any trade. Taking a small loss is a winning trade before it becomes a bigger losing position.
    How’d I do?? 🙂

  2. Overconfidence and taking on too much risk is a deadly combination. Kowing your limitations and limiting exposure are positives. Know how much you can lose before you enter any trade and stick to it, hope is not a strategy in any trade. Taking a small loss is a winning trade before it becomes a bigger losing position.
    How’d I do?? 🙂

  3. I would go back to the trades you are making money in. try to rebuild your consistency, and build on those winners. don’t try to make it all back! if you find you’re not seeing the market right, I’d play smaller until you start getting back in the game. I trade better when I’m up, but when I get down I try to trade smaller and be a bit more selective until I get to a range where I start to feel more confident in my trading. then I will try sizing up a bit more. I focus on not losing so much that I can stay in the game going into the close. but I’m new too and trading just over a year now, so good luck!

  4. I would go back to the trades you are making money in. try to rebuild your consistency, and build on those winners. don’t try to make it all back! if you find you’re not seeing the market right, I’d play smaller until you start getting back in the game. I trade better when I’m up, but when I get down I try to trade smaller and be a bit more selective until I get to a range where I start to feel more confident in my trading. then I will try sizing up a bit more. I focus on not losing so much that I can stay in the game going into the close. but I’m new too and trading just over a year now, so good luck!

  5. 1) You need an Edge
    2) You need to know yourself
    (Strengths and Weaknesses)
    3) You NEED RULES !

    Rules Rules Rules Rules !!!

    In order to beat the demons you need rules that you can follow every single day.
    Rules on entering a position
    Rules on exiting a position
    Rules on position sizing
    Rules on scaling in and out
    Rules on Risk Management..etc

    For example if you catch yourself over trading, you need to set a limit on how many trades you can take per day, and OBEY your rules religiously.

    Identify your negative patterns and establish a set of rules that will prevent you from committing those fatal errors.

    Rules will constrain you and eventually will turn into you into following positive habits. That is when you will see a dramatic improvement.

    I used google spreadsheets to create an evaluation form for the following:
    1) For all my trades
    2) For the trading day
    3) For the trading week
    4) For the trading month.

    The forms contain the data I need to log that pertains to that time frame. This allows me to keep myself in check all the time. It also allows me to collect trading statistics that a regular trading platform will not be able to give. For example, i can easily calculate the profit factor specific to each setup i trade. Think of it as your personal online trading database. This will help you know how your setups work and most important of all how YOU WORK in times of profits and loss.
    Below is a link to an example trading form i’ve developed and use regularly. Hope this will be useful.

    Copy the following link:

    http://spreadsheets.google.com/viewform?formkey=cktYSTQ1cDVaQmMtZU9lNEhsZk1SNlE6MA..

  6. 1) You need an Edge
    2) You need to know yourself
    (Strengths and Weaknesses)
    3) You NEED RULES !

    Rules Rules Rules Rules !!!

    In order to beat the demons you need rules that you can follow every single day.
    Rules on entering a position
    Rules on exiting a position
    Rules on position sizing
    Rules on scaling in and out
    Rules on Risk Management..etc

    For example if you catch yourself over trading, you need to set a limit on how many trades you can take per day, and OBEY your rules religiously.

    Identify your negative patterns and establish a set of rules that will prevent you from committing those fatal errors.

    Rules will constrain you and eventually will turn into you into following positive habits. That is when you will see a dramatic improvement.

    I used google spreadsheets to create an evaluation form for the following:
    1) For all my trades
    2) For the trading day
    3) For the trading week
    4) For the trading month.

    The forms contain the data I need to log that pertains to that time frame. This allows me to keep myself in check all the time. It also allows me to collect trading statistics that a regular trading platform will not be able to give. For example, i can easily calculate the profit factor specific to each setup i trade. Think of it as your personal online trading database. This will help you know how your setups work and most important of all how YOU WORK in times of profits and loss.
    Below is a link to an example trading form i’ve developed and use regularly. Hope this will be useful.

    Copy the following link:

    http://spreadsheets.google.com/viewform?formkey=cktYSTQ1cDVaQmMtZU9lNEhsZk1SNlE6MA..

  7. You are going to lose money trading on some days. I have been in the same position as you a few times in my short trading career. I try and focus on what I did wrong and what I should have done at the end of the day. However, I find these days to be extremely important in developing as a trader at any level.

    For me, having a great month or week then having a very, very bad day is important. This is where I want to destroy and rebuild bad habits and bad plays. This is when you are most honest with yourself too, after a bad day. You come off cloud 9 and the only thing there to catch you is yourself.

    You were referring to a chart of your work, how it was in an uptrend. Now it is pulling back, but still strong. You need to find support for yourself and build off that and make a new high.

    Sorry for the silly analogy. Good luck

  8. Lots of good comments here. But I think one of the most important thing that hasn’t been said yet, though it’s been said in the blog many times, is to visualize and practice each day. Spend fifteen minutes a day for a couple months putting your mind into the frame it is in when things blow up. Imagine yourself doubling down when you are already too large, imagine yourself holding out of hope even though your stop has been met but you still have the position. Then imagine yourself doing what is so very hard to do when you find yourself in those positions…admitting you are wrong and the trade is no good and you exit.

    Imagine yourself doing the right thing, practice recognizing what you feel like when this happens and how to spot it and correct it. Your brain is wired to react wrong to trades when your emotions are just right and you find yourself grasping to hope, you have to rewire it to not even get into the beginning of the bad behavior. You can also fire up a fake account and practice taking positions, randomly…doesn’t matter, eventually they’ll go against you, then you recreate your bad habits, let a position go past a stop loss then add more to it. Then when you start to feel the real feelings you would feel were you trading real money you correct the behavior, cut your loss, or if that’s too hard to do at first work on selling half into any blip of strength. Be aware of how putting yourself into that position makes you feel and how it makes you act. Then develop rules to follow to get you out of the situation.

    But don’t stop there! After you can do that easily start to work the same way to develop rules to keep you from ever finding yourself in that situation. If you doubly protect yourself the odds are much less that you ever take a huge rip…if you only work on rules and practice that prevents you from getting into that situation your bad habits will lead you there eventually and you won’t know how to get out, so it’s good to practice avoidance, and damage control. If you only ever practiced damage control you’d still take some big rips.

    Like someone said, rules are key, but rules are meaningless if you don’t follow them. And breaking bad trading habits isn’t easy, it takes repetition and practice, you need to drill it into your brain how you want it to act so that when you find yourself in the situation the correct move comes naturally and isn’t some gut wrenching terribly hard decision that you can’t make or are terrified to make. It has to be swift and sure decisive and like breathing…it has to be learned and natural.

    So I say keep practicing putting yourself into situations that normally kill you, because the more you train your brain to react correctly and to not get yourself into bad situations in the first place the more consistent you will become.

    Hope that helps, I suffer from the same problems, as do many others..:)

    So to you all, keep up the practicing.

  9. Lots of good comments here. But I think one of the most important thing that hasn’t been said yet, though it’s been said in the blog many times, is to visualize and practice each day. Spend fifteen minutes a day for a couple months putting your mind into the frame it is in when things blow up. Imagine yourself doubling down when you are already too large, imagine yourself holding out of hope even though your stop has been met but you still have the position. Then imagine yourself doing what is so very hard to do when you find yourself in those positions…admitting you are wrong and the trade is no good and you exit.

    Imagine yourself doing the right thing, practice recognizing what you feel like when this happens and how to spot it and correct it. Your brain is wired to react wrong to trades when your emotions are just right and you find yourself grasping to hope, you have to rewire it to not even get into the beginning of the bad behavior. You can also fire up a fake account and practice taking positions, randomly…doesn’t matter, eventually they’ll go against you, then you recreate your bad habits, let a position go past a stop loss then add more to it. Then when you start to feel the real feelings you would feel were you trading real money you correct the behavior, cut your loss, or if that’s too hard to do at first work on selling half into any blip of strength. Be aware of how putting yourself into that position makes you feel and how it makes you act. Then develop rules to follow to get you out of the situation.

    But don’t stop there! After you can do that easily start to work the same way to develop rules to keep you from ever finding yourself in that situation. If you doubly protect yourself the odds are much less that you ever take a huge rip…if you only work on rules and practice that prevents you from getting into that situation your bad habits will lead you there eventually and you won’t know how to get out, so it’s good to practice avoidance, and damage control. If you only ever practiced damage control you’d still take some big rips.

    Like someone said, rules are key, but rules are meaningless if you don’t follow them. And breaking bad trading habits isn’t easy, it takes repetition and practice, you need to drill it into your brain how you want it to act so that when you find yourself in the situation the correct move comes naturally and isn’t some gut wrenching terribly hard decision that you can’t make or are terrified to make. It has to be swift and sure decisive and like breathing…it has to be learned and natural.

    So I say keep practicing putting yourself into situations that normally kill you, because the more you train your brain to react correctly and to not get yourself into bad situations in the first place the more consistent you will become.

    Hope that helps, I suffer from the same problems, as do many others..:)

    So to you all, keep up the practicing.

  10. We all know that in this “game” the toughest competition comes from our evil side. Let’s try to win that battle first…
    These are the things that I do to win my internal battle:

    1. Lie to my evil me about the money I’ve made: let’s say that I start with 50k in my account. After making a couple of thousands, I’ll see that my account is 52k and that will give me too much confidence and cause problems. What do I do? take 3k from the intraday trading account. I’ll have 49k which will appear to be less than the amount I started with. I know it’s not true, but if I’m going to have my evil me tricking me, I’ll trick him too!
    The sight of 49k doesn’t make me feel bad and makes me keep my feet on the ground.
    BTW, those 3k go to a different account that I use for swing trading.

    – Motivational self-reminders: When I have to remind myself a few times things like the fact that stops can’t be moved (because I appear to forget frequently), I usually end up writing it in a post-it, and sticking it to the frame of my monitor. Kind of the motivational signs we see in offices and factories. Is there a better way to stick to the plan than sticking the plan in front of your eyes? 🙂

    Good luck

  11. We all know that in this “game” the toughest competition comes from our evil side. Let’s try to win that battle first…
    These are the things that I do to win my internal battle:

    1. Lie to my evil me about the money I’ve made: let’s say that I start with 50k in my account. After making a couple of thousands, I’ll see that my account is 52k and that will give me too much confidence and cause problems. What do I do? take 3k from the intraday trading account. I’ll have 49k which will appear to be less than the amount I started with. I know it’s not true, but if I’m going to have my evil me tricking me, I’ll trick him too!
    The sight of 49k doesn’t make me feel bad and makes me keep my feet on the ground.
    BTW, those 3k go to a different account that I use for swing trading.

    – Motivational self-reminders: When I have to remind myself a few times things like the fact that stops can’t be moved (because I appear to forget frequently), I usually end up writing it in a post-it, and sticking it to the frame of my monitor. Kind of the motivational signs we see in offices and factories. Is there a better way to stick to the plan than sticking the plan in front of your eyes? 🙂

    Good luck

  12. Hello,

    I am a developing trader as well, still sim trading. So maybe my advice isn’t worth much, but I do hope it helps.

    I have had the same problems as you. These are mostly psychological and the best resource I have ever found on the subject is TraderFeed, Dr Brett Steenbarger’s blog. He is well-known by the guys at SMB 😉 There have been many posts about your very issue, as you are not the only one having it. Hell, for what I know, every trader had it at one point.

    Anyway, if you don’t know this blog already, take the time to read it. Dr Steenbarger was kind enough to create another blog (meant as a companion for his latest book) where you can find lists of his best posts : Become Your Own Trading Coach.
    It took me months to read everything but I am so glad I did.

    In the end, you’ll learn that you need to face your weaknesses instead of trying to avoid them. You blew it the other day : try to figure out what you did. What went wrong ? What state of mind were you in at any moment of the day ? Do you log your trades ? If so, re-read what you wrote. If not, you should start to do so. When did you realize you were holding on to losers ? What did you do then, did you exit or did you keep holding on ? Did you have a maximum loss for the day ? If so, why didn’t you leave ?

    All these questions (and many more) are the ones you should be asking yourself. This is NOT an opportunity for self-blame. Rather, you should honestly analyze and write what you did and why. You must learn from your mistakes and only by confronting them will you be able to overcome them.

    Also, spend time to review your 12 previous great days. What did you do so well those days ? What are your strengths ? Build on them. Work your next trades based on those strengths. If you did something well on a day, then your main goal for the next day must be to do it again. “I was able to quickly exit my losers this morning, which allowed me to trade in the afternoon and end the day in the green” : do it again tomorrow.

    Another advice I could give you is : when on a winning streak, you should take some time out at some point. You said you were up on 12 of 13 days. This is really nice and maybe you should take a day off once in a while, at least in the beginning. During that day off, re-analyze your previous trades and find out the strengths and weaknesses.

    Sorry for the long post, especially if that is not useful at all. I thought I’d just share what helped me a lot these past few months.

    Good luck, I sincerely hope you will make it 🙂

  13. Hello,

    I am a developing trader as well, still sim trading. So maybe my advice isn’t worth much, but I do hope it helps.

    I have had the same problems as you. These are mostly psychological and the best resource I have ever found on the subject is TraderFeed, Dr Brett Steenbarger’s blog. He is well-known by the guys at SMB 😉 There have been many posts about your very issue, as you are not the only one having it. Hell, for what I know, every trader had it at one point.

    Anyway, if you don’t know this blog already, take the time to read it. Dr Steenbarger was kind enough to create another blog (meant as a companion for his latest book) where you can find lists of his best posts : Become Your Own Trading Coach.
    It took me months to read everything but I am so glad I did.

    In the end, you’ll learn that you need to face your weaknesses instead of trying to avoid them. You blew it the other day : try to figure out what you did. What went wrong ? What state of mind were you in at any moment of the day ? Do you log your trades ? If so, re-read what you wrote. If not, you should start to do so. When did you realize you were holding on to losers ? What did you do then, did you exit or did you keep holding on ? Did you have a maximum loss for the day ? If so, why didn’t you leave ?

    All these questions (and many more) are the ones you should be asking yourself. This is NOT an opportunity for self-blame. Rather, you should honestly analyze and write what you did and why. You must learn from your mistakes and only by confronting them will you be able to overcome them.

    Also, spend time to review your 12 previous great days. What did you do so well those days ? What are your strengths ? Build on them. Work your next trades based on those strengths. If you did something well on a day, then your main goal for the next day must be to do it again. “I was able to quickly exit my losers this morning, which allowed me to trade in the afternoon and end the day in the green” : do it again tomorrow.

    Another advice I could give you is : when on a winning streak, you should take some time out at some point. You said you were up on 12 of 13 days. This is really nice and maybe you should take a day off once in a while, at least in the beginning. During that day off, re-analyze your previous trades and find out the strengths and weaknesses.

    Sorry for the long post, especially if that is not useful at all. I thought I’d just share what helped me a lot these past few months.

    Good luck, I sincerely hope you will make it 🙂

  14. As a new developing trader, it is extremely difficult to overcome a streak of bad days. You must accept the fact that noone is perfect. There will be days where nothing seems to work. On the contrary There will be days where everything falls into place. If I’m doing poorly I will take a step back, and focus on making one good trade after another. I like to chip away little by little until I gain my confidence back. When I am on the golf course and I have a string of bogeys , I focus on making solid contact and focus on the basics. I don’t try too hard to birdie the next three holes. Instead I focus hard on simple things. Making one good swing after another. The days where I ripped it up are days I learn the most about my myself. Use this as a learning experience and embrace the lost as a learning tool to improve.

    Good luck 🙂

  15. As a new developing trader, it is extremely difficult to overcome a streak of bad days. You must accept the fact that noone is perfect. There will be days where nothing seems to work. On the contrary There will be days where everything falls into place. If I’m doing poorly I will take a step back, and focus on making one good trade after another. I like to chip away little by little until I gain my confidence back. When I am on the golf course and I have a string of bogeys , I focus on making solid contact and focus on the basics. I don’t try too hard to birdie the next three holes. Instead I focus hard on simple things. Making one good swing after another. The days where I ripped it up are days I learn the most about my myself. Use this as a learning experience and embrace the lost as a learning tool to improve.

    Good luck 🙂

  16. Lots of great advice here. This week I stumbled on Tuesday afternoon, not as badly as I would have in the past, but a relapse nonetheless in not closing a few losers as quickly as I should have. That turned a winning day into a losing day.

    Yesterday morning, as I did my daily visualization work. an image popped into my head, and I made a little line drawing and taped it on my monitor. It shows a surgeon standing over a patient on a gurney, and it’s aimed at reminding me to employ as much care and respect toward each of my trades as a good surgeon does toward her patients. Yesterday I had a good day, boosting my average risk:reward to 4:1.

    Others have mentioned Dr. Steenbarger’s work, and in The Daily Trading Coach he writes about five stages to making lasting change. Check it out, and track your progress as you make headway on the changes you’ve identified as necessary for your success.

    Best wishes for your trading 🙂

  17. Lots of great advice here. This week I stumbled on Tuesday afternoon, not as badly as I would have in the past, but a relapse nonetheless in not closing a few losers as quickly as I should have. That turned a winning day into a losing day.

    Yesterday morning, as I did my daily visualization work. an image popped into my head, and I made a little line drawing and taped it on my monitor. It shows a surgeon standing over a patient on a gurney, and it’s aimed at reminding me to employ as much care and respect toward each of my trades as a good surgeon does toward her patients. Yesterday I had a good day, boosting my average risk:reward to 4:1.

    Others have mentioned Dr. Steenbarger’s work, and in The Daily Trading Coach he writes about five stages to making lasting change. Check it out, and track your progress as you make headway on the changes you’ve identified as necessary for your success.

    Best wishes for your trading 🙂

  18. I am a beginner too, and I lost so much money last year on stupid trades. But I am back!!! And I am not giving up. Trading is very hard work, and I use all the above tools mentioned above. And this blog is a great help. I make myself take small losses now when the trade goes against me. Also, beginners trade small, set your stops, and build your spreadsheets as above. Good luck.

  19. I am a beginner too, and I lost so much money last year on stupid trades. But I am back!!! And I am not giving up. Trading is very hard work, and I use all the above tools mentioned above. And this blog is a great help. I make myself take small losses now when the trade goes against me. Also, beginners trade small, set your stops, and build your spreadsheets as above. Good luck.

  20. Hi All…I’m the trader mentioned in the post. These are really constructive comments and I appreciate you taking time to share.

    One thing that’s particularly tough is that I can’t talk to anyone about this stuff because they would think I’m a crazy gambler. So, when I have a horrible day, heck, when I have even a mildly disappointing day, I just stew on it.

    I’m taking all you’ve said to heart. Thanks.

  21. Hi All…I’m the trader mentioned in the post. These are really constructive comments and I appreciate you taking time to share.

    One thing that’s particularly tough is that I can’t talk to anyone about this stuff because they would think I’m a crazy gambler. So, when I have a horrible day, heck, when I have even a mildly disappointing day, I just stew on it.

    I’m taking all you’ve said to heart. Thanks.

  22. HEY! He hacked into my email account and stole my notes! How did you do that? I was just writing the same thing!!!

  23. HEY! He hacked into my email account and stole my notes! How did you do that? I was just writing the same thing!!!

  24. Rgr,
    …so much great advice here from great traders with much more experience than me. I wanted to hammer-on something that a few elluded to.

    Think about how long it took you to really get to where you loved your musician skills, or how many boring bands you jammed with until you landed the awesome gig that coach Bella mentioned. This is how long or longer it should probably take to become a consistently profitable trader.

    You were killing the market in mid-april!! Figure out why: was it the trend?, were you extra focused/why?, and what kind of plays were you in? Then think: ‘what if every trade on my best day from april actually DID NOT work out.’ Instead of +$500 that day, you should have ended around (-$200).

    My #1 tip is that you and the first step is to figure out how to not lose more than x-amount on the occaisions where for whatever reason every trade goes against you. For whatever reason, you had an amazing start at trading! You’ll probably have to grind a bit and put in some screen time to be doing that a year from now.

    Check out the blog that Connor posted about a week ago, about a long-term view of trading. Inspiring…

    Hope to see you training with smb
    & sending my absolute best regards…

  25. Rgr,
    …so much great advice here from great traders with much more experience than me. I wanted to hammer-on something that a few elluded to.

    Think about how long it took you to really get to where you loved your musician skills, or how many boring bands you jammed with until you landed the awesome gig that coach Bella mentioned. This is how long or longer it should probably take to become a consistently profitable trader.

    You were killing the market in mid-april!! Figure out why: was it the trend?, were you extra focused/why?, and what kind of plays were you in? Then think: ‘what if every trade on my best day from april actually DID NOT work out.’ Instead of +$500 that day, you should have ended around (-$200).

    My #1 tip is that you and the first step is to figure out how to not lose more than x-amount on the occaisions where for whatever reason every trade goes against you. For whatever reason, you had an amazing start at trading! You’ll probably have to grind a bit and put in some screen time to be doing that a year from now.

    Check out the blog that Connor posted about a week ago, about a long-term view of trading. Inspiring…

    Hope to see you training with smb
    & sending my absolute best regards…

  26. Here goes a different kind of comment as all of the above are so useful: Unlike life (which smooths over my “stuff” like a larger time frame bar) the market takes instant and irrevocable pictures revealing where I am “at” each moment that I hit the trade button. These photos may cost alot and can sometimes be quite rude. For such a high price they are definitely worth looking at and using to one’s advantage.

  27. Here goes a different kind of comment as all of the above are so useful: Unlike life (which smooths over my “stuff” like a larger time frame bar) the market takes instant and irrevocable pictures revealing where I am “at” each moment that I hit the trade button. These photos may cost alot and can sometimes be quite rude. For such a high price they are definitely worth looking at and using to one’s advantage.

  28. Sweet blog. I never know what I am going to come across next. I think you should do more posting as you have some pretty intelligent stuff to say.

  29. Sweet blog. I never know what I am going to come across next. I think you should do more posting as you have some pretty intelligent stuff to say.

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