You've Got a Great Trading System. So Why Are You Losing?

[nhallett 10]

You've done your homework. Countless hours of

seeking out the right guru (or piecing together

your own system). Weeks of monitoring your

guru's daily trade picks (or paper-trading and

back-testing your homemade system). You've done

it by the book. No seat of the pants trading

for you!

 

OK, now you're confident. It's time to put your

money where your homework is.

 

You've had your coffee and your first trade

signal is before you. Confidence high. Trade made.

First loss. Not a problem. You understood before

you started that successful traders both win and

lose and “losing is part of the overall winning”.

 

You've also heard more then once that “successful

traders don't win on every trade.” Moving on,

still confident. Next trade made. Another loss,

but this one hurt your pride a little because

you got stopped out early in the trade, and then

the market rebounded and would have hit your

profit target if you weren't stopped out.

 

You double check. Yep, you placed the stop where your

trading system told you to place it. You kind of

had a feeling that the early weakness in the market

was just profit-taking from the previous day's

trading, but you're trading a system and you must

stick to it. Wounded, but resilient.

 

After a good night's sleep and a few mouse clicks,

your new daily trades are in front of you. Hey,

this one looks good! It's a little bit more risk

than yesterday's trades had, but look at that profit

potential! With a smiling face, the trade is executed.

 

With a nice start to the trade, you're feeling good

and you've moved your stop to breakeven, just like

your system said. Surprise piece of news - market

reverses - blows through your stop - an “unexpected”

loss. Is something wrong with the system? Has the

overall market “personality” changed, affecting your

system to the Core, rendering all your back-testing

irrelevant? Your confidence turns to doubt.

 

You decide to “watch” the next trade… I mean, isn't

it wise to make sure the system gets back on track

before you “throw good money after bad?” Isn't that

what a conservative trader does? Trade watched.

It wins!

 

In your head, you beat yourself up a little because

you know that when you started your “live” trading,

you made an agreement with yourself to take the

first 10 trades “no matter what”… and here you

wimped-out and missed a big winner that would have

gotten you even.

 

What's happening?!!

 

What's happening is that you are out of control.

Your emotions are ruling your trading. The above

scenario plays out in every trader from time to

time.. newbee and veteran alike.

 

The winning trader senses what is happening and

nips it in the bud. The winning trader spend time

EVERY DAY, working on “the discipline of trading”.

Reads a chapter in his favorite psychological

trading book, scans the “ten commandments of

trading” that hangs on the wall over his/her desk,

listens to his/her mental training software for

futures traders… Something… Every Day… before

trading begins.

 

There are many more losing traders than winning

traders… and it's seldom about the trading system.

In my career, I've come across at least 50 systems

that I consider A+, yet I know for a fact that MOST

traders that have traded on these systems have lost.

Why? They were not in control of their emotions.

 

Are you?

 

 

My best,

 

Norman Hallett

[TimRacette 11]

Spot on Norman, I've found that becoming a consistently profitable trader is so much more about your ability to detach yourself from the money and the emotions to trade 100% objectively, as apposed to focusing on the system. Great post.

[nhallett 10]

Sounds like you're living proof of a successful and disciplined trader! Thanks for the feedback!

[jackb 10]

Norm, let's have a chat about Quantum Mechanics and Masaru Emoto.

[Ingot54 13]

Norm, let's have a chat about Quantum Mechanics and Masaru Emoto.

Jack - I had never heard of Masaru Emoto until now - thank you.

 

After Googling and reading, I was amazed at the similarity between his ethereal and unsubstantiated theories and those of the trading support group known as trading psychologists.

 

I won't write one of my famous long essays on this topic at this time.

 

But I would simply like to ask a couple of rhetorical questions to psychologists and those who purport to belong to the erudite "Traders Support Fraternity":

 

1) Where are the successful students with their testimonials ... real ones?

2) Where are the students' yachts?

 

Kind regards, and tirelessly in pursuit truth,

 

Ingot

 

PS - It might be that Psychologists belong in a group with Dermatologists.

 

Their clients' conditions:

1) Never get better;

2) Never get worse:

3) Never ring up in the middle of the night;

4) Always remain in need of therapy