Small trading accounts, emotions, revenge trading and more – Q&A with Tradeciety

Small trading accounts, emotions, revenge trading and more – Q&A with Tradeciety

 

 

Yesterday, I did a live Facebook video where I answered a few trading questions from the attendees. Make sure to subscribe to my YouTube and Facebook page to get notified about upcoming live videos.

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You can also leave a comment below if you want me to answer your question in the next video!

 

Question: “Is It important to view the chart every four hours so that we don’t miss the opportunity? What will be your recommended number of times to see the charts?”

That really depends on the timeframe that you’re trading. If you are on the four hour timeframe, every four hours is enough. I am on the lower timeframes every now and then I do go down as low as the 15 minute or 30 minute. And I do check my charts multiple times per day. But what I usually do is I set price alerts. So when I prepare my charts, I set price alerts at the most important key areas, breakout levels, support and resistance, supply and demand zones. And this helps me to stay organized and stay on top of things. So I don’t miss as much.

 

Question: “How do you scan your past opportunities?”

I use tradingview, but I do it manually. So I will go through the list of all my Forex pairs. There are currently roughly 44 pairs on my list and I will go through them one by one by one. And I have specific filter criteria that I use. I look for trending markets. I look for markets that have good technical support resistance. You have a good pattern maybe. I use the medium-term moving average as a filter as well. So I look at the daily timeframe for example, and I look where’s the price action with relation to the 50 period moving average, but I do it all manually. It doesn’t take a lot of time. Well, I’ve been trading now for 13 to 14 years. So I’ve been doing this for many, many times, the scanning process. In the beginning, it will take a little bit long, obviously, but with practice, you will get the time down quite a bit.

 

Question: “What Is your opinion on swing trading in terms of day trading? What time you use the most?”

I used to be only a swing trader, but when Corona started, I completely changed to the lower time, or not completely, but I changed to lower timeframes. Just because the higher timeframes are less reliable these days and they are not, there’s not a lot of momentum. So right now trading the higher timeframes is really different. Especially if you’re looking for high momentum moves, you can see that the daily timeframe has very narrow ranges, not a lot of trending markets. So I like to go down now as low as the one hour, 30 minute, occasionally even the 15 minutes, but usually, I try to stick to the 30 minutes and one hour.

But one important thing is that there’s no right or wrong when it comes to timeframes. It really matters on your psychology, on your personal makeup. So those are the most important things that you need to ask yourself, is the timeframe really the right choice for yourself or is it not a good match? For example, what I often see is people that are very, very impatient. They have a hard time trading the higher time frames because you get less trading opportunities. And those traders, they often want to trade more. So it’s not as clear as an answer. There’s a lot of things that need to go into answering this question. But in general, there is no better or worse timeframe. There is no right or wrong timeframe. That is really what matters.

 

Question: “How Many years did you practice?”

So I’ve been trading now for 14 years, I think. I think so, yeah, roughly. And after five or six years, when I started trading, I quit my job to just fully focus on trading. So it doesn’t happen overnight. It doesn’t happen within five months. It doesn’t happen after a few months, it doesn’t happen after a year, it will take years, but it’s still worth it, I think. Don’t be discouraged if you think this is going to take much longer than you think, don’t expect to become a millionaire overnight. But if you have a long term approach, then you have a very good chance.

 

Question: “How Do you set your percentage goal realistically?”

First of all, I never set a percentage goal. There are just so many things that are not good at having a percentage goal. First of all, you cannot control how many trades you will have. Second, you cannot control how those trades will play out. And of course, also, return depends on risk. So you can’t just look at the return without neglecting the risk. It’s very easy, or it’s very different to hit a 5% per month goal, if you take a risk of 0.5% or if you risk 10% per trade. So percentage goals are not good to have as a trader. I know many people naturally gravitate towards having percentage goals, but this is more like a nine to five mentality, where people want to have a stable income.

When they’re coming from a nine to five job and they’re used to having a stable income, but as a trader, you cannot have percentage goals because as you said, what do you do when you hit them? Do you stop trading? Why? Or do you keep going? So there are many, many things that why percentage scores are not good. Just stay open to what the market is offering. Take the trades, take the setups that the market is showing you, manage your trades as best as you can. And just keep growing. There will be months where you exceed your monthly goal or potential monthly goal, and there are months where you will just come short of it. If you’re short of your monthly goal, don’t be discouraged, and don’t try to just ramp up your risk or trade more. That’s really dangerous.

And when the market is favoring your strategy, don’t stop trading because that’s the time when you really need to milk it. So percentage goals are really, really bad to have, actually.

 

Question: “If you’re given the choice of Candle or line chart, which you prefer more?”

Well, the line chart is really good. And it can be very helpful when it comes to drawing support and resistance. But if you have to choose between one or the other, candlesticks obviously will help you understand volatility a lot more. How much does the price fluctuate? What is the general volatility? And obviously this information is important when making trading decisions when placing stops and targets and all of those things. So, yeah, I like to have both, but if you have to choose between one or the other, obviously line charts are not going to be super practical in real trading.

 

Question: “How many percent growths per year?”

Again return always depends on risk. So it’s not the right metric tool to focus on as a trader. Something that is way better to focus on is to focus on R multiple, for example. Risk multipliers are much, much better as a neutral result metric. that is much, much better to look at than percentage. And you can compare your performance with other traders much, much better. Whereas when you compare your performance in percentage terms, obviously you don’t know always what the risk is that the other trader took, to generate a certain return. So you cannot really look at a percentage exclusively. You would have to look at something like a risk-to-return or return-to-drawdown metric, for example. Percentage return is not a good metric to judge your trading by.

 

Question: “What Is the best way to grow a small trading account?”

First of all, you need a lot of patience, and you need to have realistic expectations. Don’t expect to have, or to grow a small trading account into a fortune within the next few years. A small trading account is harder to trade in my opinion. And you really have…if it depends on “small”, if you talk about 500 or a thousand us dollar, it would take you years, five to 10 years to really get to a place where you can take training seriously.

It is unfortunately the truth. It is, it makes it much harder for new people or undercapitalized people to trade, but it is the way it is. There’s no way of sugar-coating it. It’s just much harder. You need to have a lot of patience. If you can trade profitably on a small trading account, what I often will recommend, or what is a possibility is that you may add to your trading account every month. So if you’re profitable and that’s a very big  IF, you need to be consistently profitable on your trading account, and then you can think about maybe adding 50, a hundred, 200, whatever you have as a, as your savings or a spare money every month that you can add to your trading account to keep it growing and growing and growing. That’s really, really important.

If I’m very honest, trading a small trading account, I’ve never seen anybody make it happen. I’ve talked to brokers, even among thousands of people. It’s not happening. The trading industry would like you to believe it, but trading a small trading account is just really, really hard. If you rely on it exclusively, there are other third-party services like Darwinex, for example, I’m not affiliated with Darwinex. I don’t earn a commission. I don’t recommend them blindly, but I’m just saying that the business model of Darwinex, where you as a trader don’t have to pay a monthly fee, to get exposure to their service is really good because there are many services out there that charge you month after month to maybe get exposure to other people’s money. But on Darwinex, for example, it’s just a regular broker. You can share your trading history and your trading performance, and people can choose to follow you and to invest in you. And then you get a performance share. It’s basically like a little hedge fund setup. And this makes more sense for people who have small trading accounts. I’m not saying you should sign up with them, do your own due diligence, but there are many options in today’s world where people with small trading accounts actually have a shot, and you should not rely completely on trading your own money. That’s really important. I think.

 

Question: “How Can you avoid overtrading? What is a really, really a good number per week?”

So “trades per week”, I guess is the question. Well, let’s do this one by one. First of all, how can you avoid overtrading? I think, or what I did, in the beginning, is that if I felt that I was getting emotional, especially after a loss, I will just close my trading platform and leave my trading computer. Because you don’t obviously have the opportunity to then trade again. It’s a natural…it’s a…you cannot just, you cannot… What’s the word… You cannot do anything stupid that you would do when you just stay in front of your computer. Because let’s be honest when you are new and you take a loss, that doesn’t feel good. And then naturally you try to recover it immediately. And this is how revenge trading exists.

So when you have a loss and you feel like you’re getting emotional, when you feel like you want to do something that you shouldn’t be doing, close your computer, turn off your trading platform, don’t have your MetaTrader four or your broker on your phone, or at least don’t have your phone with you then, so that you’re not tempted to do something stupid. And then just go away for one hour, two hour, three hours, four hours, or maybe just come back the next day. And you will see that the world isn’t ending if you cannot make your money back right away. And this was a very big revelation for me. I always thought that I can’t end the day in red. I can’t end the week in red. I need to always get back to where I was. But in the end, you just bury your own grave.

You always dig a deeper hole, a deeper hole, and a deeper hole. So if you see that, if you have a loss and you cannot make the money back right away, it’s not the end of the world. And over time this was sinking into your subconscious, where after losing trade, you don’t freak out. You just accept that, okay, this is a loss. I did everything that I could have done or should have done with the trade. And then you just move on to the next loss. And over time you will put a natural resilience for revenge trading, so to speak. So in the beginning, I would say, if you feel emotional, close your computer and just do something completely else, come back in a few hours or the next day. And then you’ll see that it doesn’t feel so bad to lose a trade every now and then.

 

Question: “How Do you deal with emotions?”

Because there’s so much…it’s unbelievable how much misinformation there is about emotions and trading. So the first big, big misconception is that traders have to trade like a robot. You have to somehow suppress your emotions. And this is not true. It’s not only not true. It’s very bad advice. It’s dangerous, and it will make you a worse trader. Why is that? First of all, you cannot suppress your emotions. Humans, we are humans because we have emotions. Your emotions are very, very helpful for navigating throughout life and all those things that we encounter every day. So emotions are there for reason. If emotions are not helpful or were not helpful, evolution would have gotten rid of them, obviously, in trading, it’s a little bit different. It’s new, it’s electronic. It’s not how this “Hunter-Gatherer” mentality grew up, but emotions are really, really helpful in trading as well.

You need to understand that emotions are trying to tell you something. When you feel very emotional in your trading, something must’ve gone really, really wrong because in the end, trading should be a very boring or dull job. Let’s, let’s call it “dull” better, not boring dull because in the end you do every day, you do the same thing over and over and over again, you take the same trades for the same rules to the same processes. So when you feel very emotional in your trading, something must’ve gone really wrong. You must have broken your rules. Maybe you have too much risk. You are not cutting your losing trades. You are adding to your losing trades. Anything of those things, they will, usually, those are the things that really caused the emotions to come up. So instead of suppressing your emotions and trying to shut them off, use your awareness to become aware of: “Oh, I’m getting very emotional right now, but why is that? Why IS that?” And then you look at what you have been doing in your trading and you see, Oh, this trade probably I shouldn’t be in this trade, or I shouldn’t have used so much risk or position size. And this is what I think is a much, much more healthy approach to deal with emotions instead of just trying to suppress them, which will not work anyway. You can try it, but eventually, it will come out and you will blow up. So this is usually what happens. So emotions, you need to become aware of them. You need to be able to use them as a guide instead of trying to see them as an enemy. And then your trading will change completely.

 

Question: “What Is your favorite setup or strategy?”

It used to be pure breakouts and ever since I’ve been doing the MasterClass with Moritz I really enjoy his trading approach to pullback approach. I’m adopting it more and more and more. I really like the way he looks at the daily and one-hour combination for finding pullbacks or for trading trends. It’s really fascinating. And I’ve been getting more into this.

 

Question: “Have You ever blown an account? If yes, how did you manage to come back?”

Yeah. Luckily I did this, not with a big account, but in the early days when I was more or less starting out, so it didn’t hurt too much. It was still a lot of money for a student back then. And obviously yeah, it’s not good to blow an account, but I understood I was looking at my trading and I understood that I was just doing really really stupid things. And I couldn’t blame anyone but me. When you use real risk management, it should be almost impossible to blow up a trading account, if you risk 1 or even if you risk 2% per trade. And if you adjust your risk every trade, it is impossible to blow up an account. It will take thousands, hundreds of trades to lose an account. So if you blow up an account, it is 100% on you because you violated risk management. It’s virtually almost impossible to blow a trading account except for maybe a black Swan event or whatever. But when you just look at basic risk management, it should be…it’s impossible. And almost … Obviously you can lose a lot in trading, or you should always read your brokers’ disclaimer and risk, blah, blah, blah. But if you just look at the pure math of risk management, then yeah. If you blow an account, it’s a hundred percent on you. And this is a big mindset shift actually, once you realize that it is on you. Yeah. You can change it as well. So that’s, that’s the good news actually.

 

Question: “How Much percent of the total portfolio are you at risk at any given time?”

Well, as I said, talking about percentage doesn’t really mean anything, because percentage, obviously when you have a big trading account, your percentage per trade will go down significantly. But in the beginning, usually what will happen is if you have a small trading, you will risk more. And when you’re trading account grows then the risk goes down naturally. That’s usually what happens.

 

Question: “How Do you pass time during your trading days?

So you can’t see it, but my dog is here. So it is taking up quite a bit of time. I like to read a lot. I do other things, I do sport, so yeah, there’s I do other online business-related stuff, obviously, I’ve Edgewonk to look after, I write a lot. So I will keep myself busy. I don’t like to look at charts during the day a lot. So the less time I look at my charts, the better it is for my trading. And you need to keep yourself busy. That’s really important.

Leave a comment below if you want me to answer your question in the next video!

 

Comments ( 3 )

  • Barry Desautels

    Thank you RoIf. I always enjoy the videos. Lots to learn. Well presented.

  • Anonymous

    Hi Rolf!
    I wonder what is your process for learning in general? Not specific to trading necessarily, but your reading habits etc. Do you take notes? Make outlines? Use software for writing? You keep track of your trades with Edgewonk of course but do you journal the rest of your life as well?

    I’m interested because you seem to be very effective at moving forward and never stagnating! I find it inspiring and of course always appreciate your knowledge!

    Peace
    Matt

  • Oleg

    Thanks a lot. Your blog is one of the best sourses for traders

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