All the below are based on my preferences, I don't give any financial recommendations and I have nothing to sell you with this article. I'm sharing content because I see a lot of traders being/becoming broke and I don't want you to be one of them.
Your ability to stick to a strategy matters more than the strategy itself
As a systemic trader, I've always said knowing what to do is the easy part.
Applying a proven strategy with unconditional conviction is when it starts getting hard.
Trading against your deep beliefs
You want to believe a narrative
You want to believe it has to go up or down because someone from CNBC/Twitter said something
When any trading strategy then gives a signal in the opposite direction of your beliefs, you're undecided, you can't take the trade.
I've heard those sentences from unexperienced traders
"It has to go down because the FED increased the interest rates so I'm not taking that Long" "It has to go up because ABC is an inflation hedge and we're only 3X from the previous ATH"
Let me ask you this...
Don't you think most traders are losing money because of their beliefs?
Trading against yourself
There is a signal to exit but you don't want to exit because the last few exits made you exit too early..
There is a signal to enter but you don't want to enter because the last few entries weren't winners...
Then comes an entry that you decided to ignore, the trade worked wonderfully but you ignored it....
Then comes an exit for a trade you're in that you decided to ignore leading to a bigger loss....
See a pattern here?
Following a strategy is hard because it's trading against who we are and what we think.
But, once we learn to ignore as much as possible our "human" side, is when we start making the sweet gains!!!
Quotes of the day
- “Everything must be made as simple as possible. But not simpler.” ― Albert Einstein
- “Any system was a straightjacket if you insisted on adhering to it so totally and humourlessly.” ― Erica Jong, Fear of Flying
I'll keep bringing a few articles like this every week because it helps me clarifying my thoughts AND giving back to the community makes me feel good about myself somehow :)
Thanks. I agree. Somehow we always lose trades (open/close)... then when we analyze... we find more reasons than you wrote above... there are also lost trades that we can't explain... but we have to identify the causes.. (freedom means learning from mistakes - N.N. TALEB)
Daveatt
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@BahamasX, once we find a strategy giving historical signals of being at least 80% profitable over an extended period of time, the challenge is then sticking to that strategy
BahamasX
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@Daveatt, agree, but any strategy needs to be updated and improved... and so on ...
Daveatt
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@BahamasX, 100% The challenge is to know when to update it or when to ignore the losers we had because they're part of the "strategy"