Friday, 25 March 2011

Facing Truths

I haven't posted for 2 days now and there is one simple reason for that - I've had a nightmare. Every minute of every trade, I've been anxious to the point of a breakdown. It's been absolute hell. I became rigid with fear every time I hovered the cursor over the ladder and this lead to me not placing many bets which were spot on for my strategy. Nearly all of these moments would have produced winners. And of course, on the occasions when I did get stuck in, I would end up losing more often than not. After a while, I just started to panic. I didn't know whether I was coming or going. The stress was so intense, my whole body was boiling over and I couldn't even bare to be in the same room as my PC. Minutes felt like hours, as I paced from room to room, checking on the scoreboard updates intermittently. During some matches, when they started to go against me, I would cut the trade short through pure fright, and more often than not, those trades would go on to produce wins. The frustration made me do stupid things, including one occasion where I threw an arbitrary amount on one player to win and didn't even bother following the game, just prayed and hoped. It lost. My get-in points became more and more badly timed, as it seemed I always got involved at the exact moment the market did a u-turn.

On Wednesday, I actually finished the day with a tiny profit. Tuesday would have been break-even but for that one throw-away bet. But on Thursday, I had literally NO wins. Every single trade was red for the entire day. You can count the number of times that has ever happened to me on the fingers of one hand. Overall, I hadn't lost a huge amount but it was the way that it happened that got to me. I was supposed to have stopped paper-trading the new strategy but because I was too scared to use it, I missed out on 3 more days of profit and now, my bank is once more decimated.

I have had 3 sleepless nights of tossing and turning. On the 3rd night, I decided that I couldn't put myself through another day of torment. My nerves and confidence were shattered and one more day could lead to me completely losing the plot. So I stayed awake till 4am, desperately trying to work out what my next step should be. I knew that I had to face some home truths. Firstly, I was never going to get anywhere unless I fully committed to the new strategy. That meant that I had to trade without fear. So what was causing the fear? Anxiety about my financial situation. How could I lessen the anxiety? One factor stuck out like a sore thumb, a factor that I had ignored and swept under the carpet the entire year that I have been trading - bank management.

As I've mentioned many a time, I'm not good with numbers. I have avoided any form of bank management like the plague, figuring that I could get by without it. There have been a few posters on this very blog that have mentioned my stake sizes and money management and I now have to bow to you and admit that you were right - I should have been looking at this from day one. I moved on to large stakes much too quickly, just 6 months into my trading apprenticeship. That was before I knew anything about the mindset required for trading or had produced consistent profitable results. I've always just thought I wouldn't need it, as once I'd become consistent, it would be irrelevant. But now I understand why it is so important. Firstly, as a novice, it allows you to experiment and to find your feet, make a lot of mistakes before you settle on a strategy and learn the markets. Secondly, as someone more experienced, it allows you peace of mind. Good bank management for an intermediate / experienced trader, means that you can suffer a bad spell without starting to get anxious. It is that anxiety which has lead to me being all-over the place and making rash decisions. There have been times where my entire bank has been my entire stake, which in hindsight, is completely crazy!

So last night, I drew up a bank management plan for the first time ever. I will not be risking any more than 5% of the bank with a lay and will set my stop loss at 5% for my back bets. This means my stakes will significantly fall but at this stage, I can't be focused on profit. I have to basically go back a whole year and do what I should've done back then; build the bank slowly, looking for consistency instead of large profit. My aim is to roughly double my bank each month and increase stake size in proportion to that increase. Hopefully, the smaller risk will allow me to trade more freely, not miss opportunities and get back to actually enjoying what I do. Time will tell but one thing I can assure you, is that I never want to feel as bad as I have done this week ever again in my life.

2 comments:

  1. Your goal to double your bank each month is not realistic and very very hard to achieve, you'll put pressure on yourself and that doesn't help. Don't rush to increase to size of your stakes if your not comfortable using big numbers.

    The new bank management plan sounds good to me, right now the best thing for you is to lower your stakes, also consider tacking a few days off.

    The situation with the arbitrary bet ... been there done that. It would be great if you could learn from other people mistake's. But now that you saw what happeness i hope you learned your lesson as i did.

    You are putting to much emotions in your trades, there's to much pressure on you shoulders, are you doing this full time ?

    Hope you'll get better with your trades,

    Kind regards,

    Daniel

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  2. Hi Daniel, I am actually using relatively small stakes now and my bank isn't big. I have to disagree about doubling the bank, as I think it is achievable. I would agree with you if I was new to trading but I've been doing this full time for a while and so I have acheived it in the past. My recent problems have stemmed from the financial pressure associated with a bad run. If I'd had better bank management, I would not be in this position.

    Overall, I got ahead of myself when I went full time and thought I'd cracked it but did not fully address two key issues - the mental side and the money management. The two go hand in hand, as I've experienced recently but now that I've begun to sort this out, I would expect to quickly get back to what I have acheived in the past.

    Only time will tell but thanks for your input and your encouragement.

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