Finance Writer



I Just Quit Trading - Here's What I Learned

Yesterday I closed out my Live Trading Account, and so as 2017 comes to a close so does my live trading. Did I end up profitable? No. Did I trade full time? Hardly. Did I learn a lot? Most definitely. Personal circumstances mean it’ll be a while before I live trade again, but as I’ve said before I don’t see this as the end, the embers of the trading fire will burn for a long time yet, of that I have no doubt.

When I set out at the start of the year with my live trading account I didn’t have any grand delusions of rolling that into silly sums of money, nor did I think I’d escape a run of both bad trading decisions and bad luck. That said, I will admit I (perhaps naively) that I hoped that by the end of the year I’d become profitable enough to start seeing some gains and had enough exposure to see consistency. In the last few weeks I saw both my Order Flow reading and Trading Decisions come on quite markedly, the Jigsaw Leaderboard and the adoption of Daytradr’s full functionality helped an awful lot too. Seeing myself ranked against other Jigsaw users and not being the worst was a real boon for confidence, sadly the last trading day drove a stake through the heart of my progress, and is a story I’m embarrassed but duty bound to tell.

But before I talk about my lessons learned and how I came to close out my account I thought I’d put some perspective on the year. There are some caveats before you look at the following information. Most notably, the number of live trades seems paltry. This is primarily due to work and home commitments meaning I was either away from trading completely for months on end, or returning to it and studying away trying to nail some things down on Sim. Second to this I was trying to keep an under funded account alive, meaning I limited myself to small numbers of trades per day, this would become a key learning point for the year and a real hindrance.

The Year In Stats

So what does a year and $1130 of trading capital get you in the futures market trading part time. Heres the answer:

Start Balance: $1130

Finishing Balance $524

Account Draw Down (Loses & Fees) $606

32 Live Trades (17 ES & 15 ZN)

Total Fees (Commissions & Data etc) $310.86

Total losses due to trading PnL $295.14

There is, as you will no doubt agree, an elephant in the room — Account Size. I went into this year full aware of all the trading advice I’d been given about being undercapitalised in the Futures Markets. I understood the logic and I understood the numbers, so why did I open a trading account that once converted into USD gave me $1130 to play with? The simple answer is because that’s all I had available for it and to be honest I just wanted to have skin in the game so that my learning was real world. This was probably the most fundamental problem with the last year.

I can’t tell you the amount of times my account size has caused me problems. Not only is it a huge psychological nag, because every time you have a trade on you are able to risk so little, it makes the % PnL swings against account size seem so big. It also causes you problems from margin, why? Well because out of the $1130 you can’t use $500 as you need it for margin, so you only have $630 to play with, trying to place stop orders in the market becomes tricky because you don’t have the margin for 2 contracts to your orders don’t go through, and when I found myself hovering near the $500 mark it just became a stress worrying about what would happen if I went under that margin. All this whilst trying to trade the ES at a volatile time where it is liable to move quickly. On the upside, seeing orders get rejected due to margin does give you confidence the regulatory risk measures do serve to assist limiting you from causing some real damage.

So my advice to anyone getting started in the game is to really listen to the advice of getting yourself properly capitalised. Personally, had I not had this issue a lot of the worry and distraction would have been taken out for me, and I think I’d have had a better result. It would have free’d me up to take more trades and trade more freely rather than worrying about the fact I’d lost 2 ticks today and should probably wrap up. It also would have stopped me trading in a quite frankly childish manner on my last trading day, trying to win back a loss which lead to me getting whipsawed and ultimately finished off my disposable capital.

My plan currently is simply that I’m not coming back to the live market until I have a decent account to play with. I still only want to trade one lot, but for the ZN and the ES I’m going to look at $1k per contract as a rule, with a total minimum of $5k, thats just my rules, but it represents the risk profile I want for the account based on what I’ve learned. I want to be able to trade for a significant period of time and have a big enough data set to be able to ascertain if I’m doing things right or wrong, then stop and readjust.

The second big takeaway for my trading year is set up. Not technical set up or chart set up, but life set up. I went into this year with a trading methodology I understood and liked, it’s one I still understand and still like. Sadly, I haven’t made any gain in Skill in it due to the fact in oder to do it justice you need to be able to sit at the screen for a significant period of the trading day, my year had other things in store for me.

With this in mind I had a look around at some resources I trusted and decided to look at the time I had for trading, sit down consistently at that time and look for a “market behaviour” (as Peter Davies suggests) and try and build some skill. This is where I saw the most progress in the year.

I started to identify my chosen behaviour regularly and (due to the account size issue) started looking to scalp into trades and see what I could get out of them. I was making progress. At least it seemed that way, the truth is the data set is just to small to know for sure and I blew it on the last day, but I was starting to see improvements in risk controls and in win ratios, I started to feel confident and was enjoying it. I had more green than red on the Jigsaw Calendar, may win was about equal to mass loss and my profit probability was positive. It felt like I was managing the downside well whilst starting to become better at seeing where the upside was probably. The problem — I was down to my last $200 in disposable trading equity, pretty precarious!

Again I had vain hopes I might be able to eek out some good trades to work me back up to my start balance, in fact that was my target, I’d decided I would be categorically making progress if I returned to my starting balance. Then the last day came, and it will read like the tale of a newbie forex trader!

When I sat down to trade that Friday I was conscious of a few things. Firstly I hadn’t traded in days, I wanted to get some trading done, secondly, it was Friday, today was my last chance for the week. Thirdly, my last trading day I’d recovered the cost of 3 losing trades in one good, well managed trade, so was to some degree confident. With all that in mind I nearly decided to not trade, why? Because my parents were up visiting for my Daughter’s birthday the coming Sunday, and the space I used for trading had been transformed into a prep station for pass the parcel. On top of this I’d been busy getting my girl to bed right up until the start of my trading window.

Despite all this, and despite having had a small glass of wine (it makes me cringe to admit this) with dinner, I plopped my laptop on my lap in the living room and decided that I’d watch the market for an hour. Watch turned into participate and after about 30 minutes I entered a trade, lost a tick, entered another, lost 2 ticks. I entered a third just as my dad’s phone rang, my nephew had been admitted to hospital. If the last two trades weren’t a hint this most definitely was. Close down and concentrate on family. I’d listened to the brief phone call still watching the flow, I’d moved straight away to market out of the trade, as if the trading gods were reaching down to impart some well deserved lessons for me I watched the ES spike rapidly against me, it had run back from 3 ticks up to 8 ticks against me before I could get out.

Thankfully the news came quickly after that my Nephew was fine. That evening I forgot trading and had a long overdue night with my parents. The next day I sat down to go over the stats, last night’s loss of $150 meant the account stood at $524. It was game over.

Whilst $150 might not seem too bad for a trading day’s loss, for me it was really disheartening, I’d essentially wasted those ticks and fees on unfocused, undisciplined trading on the hopes I’d get some positive results to give the account some flex. The end result was I’d pushed my account to it’s margin limit and eventual closure when I perhaps could have made that $150 last a few trades more and reaped the learning benefit of that time in the market.

When you look at the numbers however it does highlight some really interesting things. I spent $76.16 in fees in the ES, $54.30 on the ZN and $184 in data fees, so when you take all that out and look at it from the perspective that the $295.14 lasted me 32 trades over the course of about 25 trading days it might not be the utter failure that it initially feels like. Losses are part of trading, this one just felt worse because of the silly way I approached the trading session. I quickly forget that on the last trade I was up 3 ticks, I’d have been out at BE if it wasn’t for the rejected order issue. I’m not trying to make excuses but it is important to try and be objective and not overly negative or hard on oneself.

Am I saying that that means I did well? Absolutely not, I feel like my last day trading was shameful and if I allowed negativity to take could serve to spoil all the positive learning points I’ve taken out of this experience. I do however think I did a fair job at making that $1130 go as far as I could realistically. I also feel like it could have been a lot worse. Truth be told I don’t feel like I’ve turned a corner yet, but I’m not sure I’d see it if I had. I do feel like I’ve been learning constantly and have made some good gains in understanding and in being able to see whats happening in the order flow.

Towards the end I’d found something I thought I was starting to make progress in and I feel like when I’m financially ready to return that’s where I’ll pick up, but for now I need to go away and think about how to best capitalise on what I’ve learned and maybe put some rules in place for when I come back to trading.

When analysis how good this failure was it’s hard to know. My sample size of trades is really small and without being able to chat to other successful traders it’s hard to know how wide of the mark I’m falling.

As I’ve said before, life has other plans for my disposable income at present so it may be a while before I trade again, but when I do I’ll do it in the knowledge that I’l be doing it on the back of some good lessons. Be capitalised, get your trading paradigm straight, act professionally, limit risk. That about sums it up for me. For now, it’s Christmas. It’s time to enjoy the family, the fresh air and the free things in life. Having trading in my life is a constant teacher and something that I’m genuinely glad to be pursuing, it is however a small part of a short life, hopefully this is just me taking my licks and the next crack of the whip will be a more enlightened one and ultimately more successful.

Merry Christmas all, have a great one!