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You are not ready to trade live. You are fueled by a demon that wants money and wants it now, and until you exorcise that part of yourself, you will not find lasting success in trading. Your goal of I …
Trading is arguably one of the toughest business out there, and I doubt any trader has made it to consistent profitability without many setbacks. I wanted to see if I could entice other traders to share stories of what they believe are their greatest …
had my fair share of "what the hell" days....they are death to a trading account....I can feel them coming on...and only just now after all these years am I learning to walk away or to stop trading when I feel that sensation coming.....getting a handle on this aspect of my trading has made a huge difference in my confidence that I won't blow out again....it might happen but its getting less and less likely.....good job in recognizing it...
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
Sorry for not posting for two days in my journal. I've been thinking long and hard and trying to put down my thoughts that might fast forward this frustrating process for some of you and make you avoid the many traps that lie on the way to be coming a consistent successful trader.
Let's break it down to parts that can be easily remembered.
The first part is obviously Control. We think we are in control of our trading - the PnL curve proves otherwise.
Many traders starting out find that whenever they "decide" to do something in their minds e.g. like following a well thought out and carefully crafted plan there is an initial kickstart that make it appear that they will succeed - yes, they have it sealed this time! - only to find that at some point they find themselves ignoring the plan completely.
Let's fix this issue first.
The problem runs deep. If you want a cliché, as deep and tenuous as our evolution. The part of our brain that thought so hard, considered all cases and wrote that plan is what we shall call our Spock brain. Let's call it Spock for short.
The other part is what Morad Askar calls our monkey brain. This is your impulsive childlike part of brain that is full of boundless energy. Call it Mr.Peebles.
Mr.Peebles cannot be commanded into an OFF mode. Never. You are him in a way. You hopes, fears, ambitions, romances, desperation are the many facets of Mr.Peebles.
But you never acknowledge him directly. The thing you give credit to for your achievements is Spock - your reasoning and logical part - the one whom you think makes all decisions! But in truth the Spock part is dormant - he likes it when there is peace and quiet and when order is maintained. He does command Mr.Peebles like a parent gives orders to a child. Mr.Peebles is as obedient as a little child - he does most jobs in a likeable manner. But subvert him too much and soon he will crash in front of TV and forget about that grand project that Spock has planned for him - no logic works to make him do things Spock's way.
So, to review, here is what happens when you get a sound trading plan and then take your Spock and Mr.Peebles combo and launch into the market:
1. Use emotion as a driver.
Forget those manuals which teach yourself to be a emotionless robot while executing your trading plan. That is too much subversion for Mr.Peebles, who will ultimately waylay your best plans. Emotion is Mr.Peebles native language. IMAGINE the happiness of following the plan, the HORROR of failing because you did not follow your plan. Use Emotion as a spoon to stir your trading plan into a lively froth instead of letting it die on paper.
2. Use social pressure.
There is a reason to start your journal here on @Big Mike. I'm not doing this for you really. Mr.Peebles easily succumbs to a bit of social or oeer pressure. No one's going to pressurize you on @Big Mike, people are way too nice even while kicking your butt, but the invisible accountability is not lost on Mr.Peebles. Put out that post about the nonsense you did yesterday and Mr.Peebles is immediately on best behavior! Again, if the child you project onto trading is approval seeking, beware, and read further for the solution...
3. Make Mr.Peebles comfortable.
Mr.Peebles is also called an Orphan by psychologists. If he feels unprotected and uncared for he will go on a rampage till you sit up and notice him. Negative attention is better than no attention. So look after yourself FIRST - don't show up at your trading desk hungry, tired or without anticipating the fun, or without having had fun in your offtime.
For practical advice, see tricks in the next section.
4. Consistency
Mr.Peebles has to be trained to start doing the right thing IMMEDIATELY. This is the hardest part because of the associated inertia to start doing something but once YOU CHOOSE to do it the inertia is the best part that keeps you consistently doing the good things over and over again
We tend to make stupid decisions because we don;t think about the choices we are making. Mr.Peebles is too much concerned with NOW, QUICKLY, and FAST. So inject the START of the atrading day with Spock's prods and Mr.Pebbles get on the right track instantaneously, and continues doing so. (see Continuity below).
5. Discipline = Fun
Being a good parent means knowing who is incharge. Get your environment clear, have your trading platform uncluttered, practice execution and eliminate your environmental distractions so that Mr.Pebbles cannot find excuses. Make Spock recognize the patterns of Mr.Pebbles he needs to watch out for the most
6. Focus on priority
The good things of execution in trading are rarely the most urgent ones. Just like eating healthy and excersing show benefits over long term, good trading habits are to be prioritized instead of short-sighted goals of Mr.Pebbles ("wow, green! take profits!")
7. Be State-Conscious
If by chance Spock goes to sleep Mr.Pebbles turns into a T-Rex.
There is a need in the 'child' in each one of us that seeks for approval, praise and a pat from others. This same need flames you whenever you are criticized. While both are good, check if all you really want from trading is the approval and admiration from others. Pause for a minute and think about it. Because if your annwer is Yes then you are playing a very dangerous game. If this is an approval seeking activity it is going to be very difficult for you to lose face and accept mistakes as simply the regular cost of doing this business. Instead, losses will loom large as threats to your identity, and eventually kill you as a trader.
Criticism, from people and markets, causes anger - Anger is a disproportionate reaction to some auto-provocation. Anger and fear (and greed, which is also Fear, the Fear of Missing Out) are Mr.Pebbles triggers.
Continuity:
The solutions is monitoring. You cannot slack in this area.
Remember to monitor your:
- Health: This is achieved by good diet, good realtions, moderation, bramhacharya, good night's sleep, ensuring financial security.
- Resources: Your energy levels matter. You need the right amount. Are you tired (Pebbles: won't!), exhuberant (can work against, remember Mr.Pebbles easily excitable nature), emotionless / depressed / bland (absence of Mr.Pebbles! No trading today! Spock needs his assistant to trade.)
- Will: Remember, every decision cosumes your resources, but unlike most resources, willpower is completely exhausted and cannot be replnished in a daytrading session! Everytime you have to suppress short-term goals for long-term good in a trading decision a lot of willpower gets used-up.
Tricks and shortcuts:
- Do not introduce randomness: This means knowing your market, strategy, times to trade, and cultivating good habits without allowing events to hijack you. How? Say "No" to everything other than what you plan to do. Your survial instincts were useful while running from a mammoth, but make your intent so defined and objective that the "No" comes instinctively! No setup, no entry! Market crazy, deviate from strategy? No.
- Reduce the number of choices / decisions you have to make in a trading day. I use AutoOCO orders, monitor a single market, trade a single method, look at a 70-tick chart ONLY wihtout any other timeframes, have only 200 candles displayed and do not scroll chart back for more information. Have all the easy tasks automated and leave yoruself to take the hard decisions. This might even have the pleasant side-effect that your conscious brain will ave your decisions ready.
- Maintain focus on only the important parts of trading: Namely risk control, flawless execution, entering the screaming "must!" trades instead of might or could trades.
- Enforce limits religiously: This includes daily limits, number of trade limits,, exact size, proper stops, and regular breaks too. Don't use up your willpower on the lesser stuff but go for quality instead of quantity in trading.
- Most of all, Love yourself without fail: Ensure that you have fun, keep yourself out of depression, eat healthy (and not stay hungry because of fad diets either!). Do not stress your body because it is the critical support system that needs to be reset every night by good sleep, goodwill and lot of love. As I already said, follow the lowest stress strategy of living within your means, saving well, and using your time to your fullest advantage and not squandering it away.
Note thus that trading well is completely a game of setting priorities and then balancing your body/mental state to align with the priorities so that you consciously monitor your resources for best results. Monitoring is the key, because when you go into an autopilot / zombie mode (Spock goes to sleep) therein lies the undoing of all traders.
If I compute all the losses I had in the first four years of trading, NET I am still negative. If I ever get another stab afresh at this thing, in another life perhaps, one thing I'd like to do differently is keep my initial tuiton fee donated to the market small.
I cannot even think of using the leverage I used to go all in with in the first year.
One thing I'm really thankful for was those losses, though large, were contained, unlike for e.g. this:
However I am hopeful that the road to getting back into proper profitability, even though made longer by this initial mindless digging, would be walked over confidently.
My journalling began in 2012 in this very contest and now it is time for me to enter the new nexusfi.com (formerly BMT) Journalling contest for October 2014.
Father of two girls, a software guy by the day, I try to put in …
I hope you've had as much fun reading it as I've had writing it and composing the material.
If you learnt something from it I'll count it as my karmic bonus.