Trading is the most frustrating, infuriating, impossible, ludicrous and fascinating pursuit in the world. The lack of a connection between hard work and success is just maddening.

Today I have been stopped out of copper and Treasuries, and my other positions are moving against me, as global risk appetite returns. I sensed two days ago that this reversal was coming and didn’t get out. I wanted to hold through the reversal, but it has been big enough to take me out.

Before I felt a reversal was in the air, I had thought it might be a good time to take profits. Treasury yields fell to 3.2%, and the news is not nearly as bad as last time they were below that level, platinum fell through its 200-day moving average and quickly came back there there, and copper jumped back over 3.00, thanks to the gravitational pull of a 200-day moving average.

Now, you might say, “I thought you were going to set a profit target”. And you would be right. But I have reconsidered that idea. The point of my trading style is to get into a trend, not to take a quick profit. A trading style has to fit one’s personality, and I am inclined to let winning positions run. I can also take the pain of a pullback — and I’m getting better at that, no longer panicking out of everything on a short-term reversal. That actually means that, this time, I have done the right thing by not fleeing the market when it made me nervous. I am still in three trades that are moving against me.

The failure this time has not been trading tactics, but being wrong. I was late to the risk-off trade, having been too cautious through the flash crash.

Now, am I wrong about platinum and the euro? I don’t think so. The euro has further to fall and there hasn’t even been the beginning of a shakeout in platinum — speculators are very long. I can’t think of an excuse not to be short still, so I am damn well staying in. Doing the opposite has kept me out of any number of good trends since I started trading six months ago. Do you know what the success rate of downside breakouts in EUR/USD has been over the past year? 100%. I should have been short, but I haven’t made any money out of the trend at all. If there is one thing that isn’t the solution to my problems, it is more caution.

Copper had had a shakeout (lots of longs had been exited as it pulled back) and Treasuries were up against a strong level, so the case for both is was ambiguous — or this could just be ex-post justification for what has happened, and my other trades could be about to go as well.

The real frustration is that I don’t know. I just don’t have the knowledge to make a really good assessment of what has gone wrong here, or whether anything has gone wrong or it’s just that sometimes the market goes against you. I suppose this means I am not making obvious mistakes, but perhaps I am making ones that are harder to see. Feel free to speculate in the comments about what they might be.

One thing that keeps coming back to my mind is: wider stops. Perhaps I am shooting too high. When I have back-tested systems, I have had to place stops at at least 2x average true range from the the entry point to make the systems profitable. But my stops are more like 1x average true range. I am wondering whether doubling my stop distance (and perhaps making it mechanical to make sure that I do) and doubling my trading size would give a better outcome than I have experienced so far.

I have been trading for almost six months now and am still a failure. Something must be done. Here are the things:

  1. It is time for another comprehensive review of my trades.
  2. Make the assessment of wider stops a part of the review.
  3. I need to back-test my basic trading style on a number of markets in Tradestation — so far I have only done it on the S&P 500 and some currencies (it works).
  4. Practice. I should do simulated trading on past markets — a lot of it.