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calamitychris

Sticking to your rules

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I had a pretty tumultuous trading month. At first I made 32% on my trading account and then lost ALL of the profits. After that, I was up 25% and lost all of the profits AGAIN and then some (-10%). Fortunately I closed the month at a +25% profit.

 

After consulting my log, I realized that the two major losses that I took were a result of my not following my trading rules. I hate to think what my account would look like if I had not deviated from my original plan. It seems with me that I'll have a string of profitable trades and then will become careless and cocky and then shoot from the hip on a trade that destroys all of my previous profits. And that trade setup is NEVER part of my trading strategy.

 

Does anyone have any tips on how to remain disciplined and stick to your trading plan? I'm coming to the realization that the only way to learn in trading is to lose money or watch someone else lose money. Unfortunately I cannot do the latter because I don't know anyone else who trades...

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It's kind of like trying to counsel someone how how important it is to have good credit...either they are going to see the logic and do whatever it takes to keep their credit good...or they are gonna get hammered and learn the hard way.....

 

at that point, some rebuild their credit with a new respect for money- and others live in a state of financial turmoil and ruin indefinitely.

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  calamitychris said:
Does anyone have any tips on how to remain disciplined and stick to your trading plan? I'm coming to the realization that the only way to learn in trading is to lose money or watch someone else lose money. Unfortunately I cannot do the latter because I don't know anyone else who trades...

 

Hey Chris,

 

You answered your own question. The only way to really learn is to make the mistake yourself. Seeing someone else make the mistake you're wanting to avoid isn't going to help you at all. You've learned this month what will happen if you deviate, and all successful traders have had to learn that lesson. It sucks, yea, but its a very important lesson to be successful.

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you need to forget about the results and focus on the set-ups. keep a trading plan with X # of set-ups written-down. if you come up with a new idea during the trading day -- it can go into the plan for the next day but should not be traded that trading day. make it a competition among your set-ups to see which is best. keep one 'set-up' listed in the trading plan entitled 'impulse trade'. any trade you do that doesn't fall into the other set-ups goes into this grouping. see how impulse trades do over time. it took me a good 9 months of taking impulse trades before I 'got it' -- that you cannot syphon off your dollars earned on good trades with all those impulse trades and expect to come out on top.

 

The key to this business is simply having the patience to wait for the high-probability set-ups to occur. personally, I believe that high probability set-ups require 2 things; 1) a good pattern and 2) good trade location. If one or the other, it isn't high probability.

 

You only need 1 good trade per day to make a ton of money. Sometimes this one trade will take 2 entries. Sometimes, the market will present you with 8 good trades. Take the good ones and avoid the others.

 

Nearly all of this advice can be read on pages 20-21 of Mastering The Trade by John Carter (a decent but not great book).

 

"whenever I focused on the set-ups and not the results, I did fine. But whenever I focues on the results and not the set-ups, I got killed"

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Thanks for the replies. Dogpile - that last quote is pretty poignant. It can relate that to myself. When I focus on results, I end up over trading and chasing the market which is bad news. I just need to learn to let the market prove itself to me.

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You should also look at position sizing... Wild swings like that are sure indication that you are probably risking too much of your account on each trade. Try reducing size to 1/2 or 1/3 of what u currently use if the wild swings bother you.

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