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Okay, we admit it!! Sometimes, we - Francesco Placci and I – also make mistakes that dealt some heavy blows!!
Whether it’s due to laziness, superficiality or overconfidence, we too happened to make some bad trading decisions…
In this video we talk about our most significant losses and analyze the mistakes that caused them in- depth.
Enjoy the video and take the chance to learn from our mistakes!
Outing Our Trading Losses
Hi guys, welcome everybody here, from Andrea Unger and Francesco Placci.
Hi guys, welcome.
So guys, you might have noticed that in our videos from "The Trading Show" we often show you some very nice trades that we performed during the week and somebody asked: "You always make money, how can I make the same?"
So I said: "Yeah we show you good trades because it's what you want to see, but actually, believe me, we also lose money!".
I thought it could be useful to discuss a bit about some, not necessarily the worst losses we experienced, but some cases which are stuck in our minds, and of course I do have some.
I believe also Francesco has some.
Try to understand what is the main cause for these losses because, if we identify the potential cause, we might, I say "we might", avoid them in the future.
Andrea Unger: The Day I Lost €45,000!
So personally I remember one losing trade which I described in another video here at Unger Academy and some of you might have seen it.
It was about an over a year trade, not overnight, not over weekend, over year because it was a trade opened at the end of December, which was closed in January.
The problem was that... actually it was a losing trade, a heavily losing trade.
I had 3 contracts on the DAX future which I didn't close, and it ended up losing badly over 45,000 euros when the markets opened again in the new year.
So the point was: it was not a lack of discipline in that case, because everything was following the rules of the system, of the trading system which was trading.
So actually, not closing the trades was right if we consider what the system recommended, but my intention was to close all the positions at the end of the year and to start a brand-new activity on the new year, not even on the first days, but after the 6th of January, because the first week is normally very, very quiet.
I mean, I think you know.
Why didn't I close that position.
I didn't close the position because I was too lazy, I was too lazy to control duly when I could close the position.
I remember the miniS&P was trading to the very last day of December, I thought, I believed the DAX would do the same, but that didn't and the last trading day, in that case, was the 30th of December.
So when I saw on the 31st, that the market Eurex was closed it was sort of a surprise to me.
I couldn't do anything I had this position opened and I had to wait.
So I started thinking about some bias in the markets.
You might have seen another contribution here in our blog, about the "Trading on holidays", that as a matter of fact, on many holidays during the year, it happens on the index future to be bullish during the holiday.
So if you enter long before Christmas, before the end of the year, before Halloween or even before Easter, (even if Easter is mobile), you end up making money closing the trade after the vacation period.
The holiday effect!
Yes exactly... and I started hoping that would happen again and believing I made the right choice in the end, but it was not a choice, it was just laziness because I didn't really care about my trades.
This is the bad part.
I wasn't humble, I didn't consider that I should monitor my trades and I should carefully take all the steps to do what I was supposed to do, what was in my plan.
I didn't, and I paid.
So laziness and lack of... not really being humble, yes, of course, I wasn't, but the lack of taking care of my trading was the main reason why that trade ended up losing.
Well, it lost because it had to lose, but it wasn't in my plan and if I lose not following a plan I do make a bad mistake.
Francesco Placci: Over Week End With The Bitcoin Future
Yeah, I understand and that reminds me of something similar that happened to me on Bitcoin future.
When I started trading Bitcoin with the trading systems during 2020, I coded a very good trading system as performances, as the backtest and I didn't consider that during the weekend Bitcoin, because I traded Bitcoin on CME, the real Bitcoin, so the crypto, continues to trade during the weekend but, you know, on CME all trades are closed.
So I finished the week with two longs on Bitcoin and I realized that even if the position was correct for the system, I ended up following all the weekend the crypto market.
Because, you know, I didn't have stop-loss, I couldn't do anything.
The error, in this case, was not considering that there is a difference between the future of CME and the real crypto market.
Even if the backtest was amazing, and I followed all the rules, this was sort of laziness, mental laziness you know, and I remember with some terror that weekend, you know.
This is similar in a certain sense to what happened to you, because if I were more... how to say, disciplined...
Yes, but the point here, in both cases, even to a different extent, the mistake was... another mistake in addition to that, was a bad interpretation of backtesting.
The backtest did show good results, that's fine of course.
All our backtests show good results, if not we would not use the system, but we didn't consider, in my case, the effect of a new year eve and so on.
In your case the effect of a weekend, how heavy it could psychologically be to withstand, to cope with that kind of position and even the real risk that you were facing, because being stuck in the market with no possibility of action, which is closing the trades in case something goes wrong, obviously it's a great risk and that risk was acknowledged by you and by me.
Only in that specific occasion, when you felt fear about your position, when you realized that it was dangerous and not when you developed the system.
Yeah, correct, yeah.
I could have, maybe hedged the position on the crypto market, but you know, it's not the same.
It's a bit complicated maybe.
Yes, that's true.
Another mistake you did that you remember?
These cases we just discussed were cases where we both actually did follow the theoretical rules of a system, so we were not really bad in discipline, but in many cases, I was bad in discipline because I remember several occasions when I traded manually on a system, on a position which was opened by the system, because that position simply showed too much.
Andrea Unger: A System On Gasoline, I lose A Wonderful Gain!
In one case I remember on gasoline, a position was making a lot of money and during that trade, I felt afraid of giving it back, I was afraid: "Now what if it retraces, I give this money back, I don't want to give that money back", and I closed the position.
Obviously, I deactivated the system.
Well, the system ended up making at least 3 times the gain I made by closing the position too early and in this case, I didn't lose money, but I lost a potential gain which is again, a loss because we have to consider the money we lose because of missed opportunities when the opportunity was there because the position was opened, everything was in place, but manually I destroyed a good trade to one-third of its value.
This is a bad mistake because it shows how true it is that systematic trading helps in avoiding or burning your emotions.
But again, by being a human being, I am a human being, and also Francesco is not a robot.
We happen to make these mistakes when we consider our human instinct that can be better than the system, all of a sudden we believe our experience in the market is telling us something that the system does not know, and we click on the mouse and normally, when we do so, we make a mistake.
I think you did similar things as well in your career.
Yeah, maybe a trade that you don't know.
Francesco Placci: VXX Right Before Volmageddon
I remember on February 2018, on the day called the volmageddon, when the VIX spiked more than 100%
February the 5th I believe?
Yes, and I opened, my systems opened a long position on VXX and I think it was the day before the volmageddon.
Anyway, I was in a big gain, a very big gain and I decided to close the position.
The day after, you know, there was a huge spike on the VXX on the VIX and all the volatility derivatives.
So this is very similar to what you told me 2 minutes ago because I didn't follow the system, I wanted...
Yes, lack of discipline.
Yeah, this has happened to me too.
This is believing we have more experience than what we transmitted into the scripts of our systems.
Andrea Unger: In The Beginning, I didn't Realize I Was Overexposed
While considering the experience, I remember when I was actually needing more experience in the beginning, I used to develop systems with intraday breakouts on the DAX future and I then used the same model also on the FIB future, the Italian index future and on the mini Nasdaq.
I was planning to use that also on the CAC40, on the French market which I did not.
But the problem was that I believed I was diversifying my portfolio, but actually, these markets are extremely strongly correlated.
So more or less when you do one thing on one market, you end up doing the same on the other market, and having all the systems at work, was similar to trading just one system with two or three contracts which I would have never done because I thought it was overexposure, but I was doing the same with more systems.
Again, out of arrogance and inexperience, the days I was making huge wins, really good gains, I simply believed I was good... "Hey, I'm the man, I'm the greatest trader of the world" and I was looking at the gains... "Wow, I'm great"... I didn't consider that those huge gains probably derived from a situation where I was overexposed, and I was lucky the markets were going in the desired direction, but the day when I heavily entered in all these systems and then the markets turned to drop, I was long, then I understood there was something wrong because I experienced a very bad loss which was double, so terrible.
Because first I was seeing gains in my open position profits, but then they disappeared, and they ended up losing heavily.
So I understood that the real diversification had to be looked after in a completely different situation and the overexposure and again over-confidence because I was over-confident I really believed I was too good to fail, and I was not good enough really, and that is another big problem that many traders have because when you start making money you believe you are really good, and believing you're really good makes you over-confident, and you probably end up overexposing your positions.
When things go wrong, you happen to suffer a lot.
I remember you told me something similar, not on futures but on options with margins because you also happened to feel too good.
Francesco Placci: Early Days With A Strategy On VIX
Yes, on VIX derivatives I remember that I was very confident in my strategy, and I was at the first day, when I discovered the volatility products, and I was so sure that the strategy was a solid strategy and I invested too much money and, you know, when you do something wrong, usually the market punishes you.
I finished up not following my rules because I had some losses.
This started to become bigger and bigger and that was because I was so confident in my strategy and in my ability.
I think this was one of the lessons I learned the more, you know.
Some lessons we've learned
Now I'm very careful about margins.
I know Francesco tells me about his portfolio and I noticed that he's very careful about staying not too much exposed on any single market because he learned the lesson.
I learned it as well, but sometimes I happen to forget about it after prolonged good periods.
Again there is the danger to feel over-confident again because in the meantime you fixed the problems you had before.
"Hey, look now I'm doing really well, so I learned from my mistakes, but now I'm doing well" and then the markets normally remind you again of who is the real boss.
Yeah, anyway, I think that what you learned from this lesson, from the markets, is one of the best ways to learn the concept, you know.
Not the best but the strongest.
The strongest yes.
The best if you avoid the losses you would be happier, of course.
Yes, so even the champion sometimes makes mistakes.
I don't know about champions, but I do.
I know okay.
So, in any case, mistakes are important to learn from, and I normally like to listen to mistakes that traders committed because I learn from them.
Andrea Unger: Pay Attention To The Settings!
Another brief example is ignoring, because of laziness, some particulars about technology, and not running a proper configuration in some cases.
For example, I used to set now "GTC order" validity in my systems instead of "day" validity because some overnight systems, if you run intraday is not a problem it's even better to use day orders, but some overnight systems experience trouble when the market closes to cancel the stop loss and place the new stop loss for the next session.
It might happen you get in trouble and your system ends up being deactivated.
I experienced this on the bonds markets and I learned that the way to avoid that was to set GTC in the settings of a strategy.
I know it, but sometimes I forget to do so because I'm lazy, because I'm over-confident, because I'm too good to fail, blah, blah, blah... and normally then I pay for these mistakes.
I know, markets are terrible!
Here we go.
Of course we might have many other losses to tell you about, but we also want to let you know about our gains.
So keep on watching the videos that are published from Unger Academy, and we wish you all the best together with us for the coming videos again.
Ciao for now.
Thanks for listening.
Thank you, Francesco.
Ciao Andrea, bye.
Need More Help? Book Your FREE Strategy Session With Our Team Today!
We’ll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.BOOK YOUR FREE STRATEGY SESSION NOW >>
Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.