A former trader who joined me in December has performed like a roller coaster and now back to square one from where he started. I wrote an email to him in my earlier post but it doesn't seems to get into his head that something is wrong with the way he trades.
This trader has been struggling since the floor closed in 2005 but never give up losing quite a fair sum and digging deeply into his savings. I admire his stamina.
As usual, I asked him, "How much would you like to make a month?" He told me his objective is to make S$3k to S$5k a month. He would be happy and satisfied given that he has not been making money for so many years. I was surprised at the low target since this amount is what he can easily make in one day on the floor.
The floor days are over, many floor traders have given up trading, losing out the edge to the Algos, even many existing traders are finding it increasingly difficult to make a decent profit. New breed of traders are taking over, it's a renewal process, change is inevitable and when a trader don't adapt, losses will force him out of the game.
Why is it so difficult to make even S$3k/5k a month? Even for an old bird? Just $200 a day consistently, 10 Simsci ticks or 5 Nikkei ticks. This trader with 20 years of trading experiences, having made a small fortune from trading, knowing his technicals yet still unable to make it after 5 years.
Something must be wrong somewhere for a well educated overseas graduate who is hardworking and determined. He is not short of trading knowledge, so why?
Can I use the word STUBBORN? Nobody would be willing to admit having a stubborn personality, there would be all type of excuses and explanations to justify their actions.
This trader has chosen not to reply my email advice, too lazy to analyse what went wrong, believing that he is trading right and his strategies should work out. I tried to pull him out from falling into the drain but he chose to jump in instead.
He had 5 straight losing days last week and I can sense some desperation in him when he visited me at the arcade. He needed a break.
He lost in December, recovered the losses and made money in January, then blew them away in February. So, 3 months without income, that's the same story for most traders who are not making it. Expenses will kill them with anxiety setting in leading slowly to depression.
I told the trader to go back to basic, check his trading journal on his performace in January why he performed well for the month (he told me he kept one, hopefully, though I have my doubts). How is he able to record the journal with so many trades, he basically didn't even plan his trades.
Of course, looking at his daily trading statements, I have already sound the alarm bell to him before he slide down into losing territory, I knew something was not right with the way he trades.
His trading volume increases tremendously scalping form home without increasing his profitability. He trades a few different contracts including overseas contracts like DAX, S&P, Currency futures, Nikkei, Tw and the core Simsci. I didn't like the small profits that he makes with the increased comm, a recipe for disaster waiting to happen. He lost his focus.
It does not make sense for a trader trying to make S$200 while the comm adds up to more than $300 a day. It's totally not logical, obviously he's trying to make more, his impatience is his greatest weakness, he is just not ready yet to increase his size.
Scalping is not for someone trading from home, when a trader's profit per trade is small, he is definitely on the wrong track, success rate will be low in the long term.
This trader told me that he increases his trading size after the good performance in January, didn't average on bad trades but being stopped out most of the time. Explanations again that I find it hard to accept but nevertheless, he's trading his own money and only answerable to himself. It must be small profit target but big stop loss levels.
I have emphasie many times to go for good quality trades, just one or two trades a day to make that $200, be patient to wait for that rabbit, it's boring, it's tough but can be achievable. That's the objective for a beginner, accumulate and build up the base, the foundation neccesary before increasing the size.