Traders checklist to path of giving up:
1.Using logical assumptions behind every opinion or information one accumulates. If something makes sense...thus it must be true.
2.Changing strategy based on last play that would have worked much better if SL was just a bit larger.
3.Switching from strategy to strategy without actually stress testing any of strategy.
4.Assuming how good or bad performance is based on 10 trades.
5.Jumping behind the charts at random time for 10 minutes a day expecting a high quality play to pop up just around the corner.
6.Listening to media outlets for strategy suggestions or prediction calls.
7.Trading only one or few instruments while holding firm belief that that is the only way to go in trading.
8.Assuming that plays on low TFs have poorer performance due to 1000 of reasons.
9.Reading a book on trading and assuming that everything in that book is a fact, not an opinion statement that might have not been tested.
10.Listening to prediction callers that every time they have chance for media expousre remind everyone, how great their one call was....5 years ago. Thinking that this somehow makes them very highly trustworthy.
11.Putting a blame on outside factors or persons when trade goes wrong. Self defense mechanism.
12.Trading with anger.
The above recipe book is something that every single beginning trader will follow. No exceptions. Traders path of self development is going and following all those steps and uncovering them one by one, by recognizing mistakes and adopting / changing the approach one has and that means radical change in thinking, a 180 degree flip. As long as trader keeps sticking to above rules a failure of eventually giving up is guaranteed. Trading is not just a money making or loosing process, its a development process of thinking that is in line with realistic expectations and efficiency- eg with other word - the results.
Solutions:
So to flip that around that is how each recipe has to be re-scripted:
1.Logical thinking is completely over-rated. Research any opinion that one has, test it does that opinion hold with consistency? Does historical data points to it relevance, if it doesnt....discard it on the point. Any information that trader accumulates, one should ask themselves .... what and how can that data be used, how can it be fit in strategy exeuction? If it cant be,...its most likely useless data. If it doesnt contribute to anything discard it. Always be empirically minded, not logically minded. Test the data.
2.Strategy rules are always formed by sample of at least 100 samples or even better 1000 samples, never should any rule of strategy be changed just based on one play. That is not fitting rules to behaviour, its fitting rules to exception.
3.Any strategy that isnt stress tested, really hasnt been confirmed or denied if it works or it doesnt. Moving from strategy to strategy without actually testing it is like starting new business every day without actually forming, testing and collecting data of each business performance before actually confirming that business might not be working out.
4.While 10 samples can actually tell if trader is doing something wrong, it usually is not enough. Usually 100 samples are needed to see if trader is underperforming the strategy, the only exceptions are where trader is making on very big mistake that has huge effect on performance....then a 10 samples will be enough to uncover that already. For example if trader risks 50% of account on trade, then just 10 trade samples will reveal that as a huge problem.
5. Each TF needs time to develop good plays, the higher the TF the lower the chance that good play will appear in that random 10 minutes. Realistic expectations of statistics are important. And for each exact strategy / pattern, trader can actually do proper statitics with proper research on what the chances are that good play will appear if he can only dedicate 10 minutes of time to charts each day.Having non-realistic expectations will lead just to making further mistakes.
6. Media outlets do not have strategies. They only show ideas. Ideas are cheap and worthless.
7.Test and research. If random X instrument has same patterns than asset Y, add it on trading list. Keep repeating the research until you find all instruments that can or shouldnt be traded. Dont assume, do research. Some strategies are very strict in what assets can be traded on, and some are very loose (for example patterns on this thread).
8.Simply not true, order flow is order flow. Now aside from that, yes there are reasons why low TF will be costlier to trade, with much higher commission per trade costs, and spreads, and time delays. But speaking strictly from price behaviour perspective its all very similar.
9.There is a mountain of miss-informations in books, movies, internet name it, assuming that information is aligned with reality just because its elegantly presented in book is a very costly way of belief. Test.
10. If someone has only 1 call to brag about, its most likely nothing else to show. I have never seen a proper trader that does that, a consistent trader moves from trade to trade without putting much of spotlight on good plays.
11.One of key variables for trader to succeed is to accept that any mistake on trade or bad trade is his own fault and noone elses. Shifting a blame is simply not admitting to mistake, and not admitting to mistake means that trader doesnt actually admit to problem, and not admitting to problem means that problem cant be solved. Trading and strategy development is just like business....its a problem solving game.
12. This was mentioned many times on thread already, but there really is nothing that comes even close to destructive force that anger has for traders account.
It could be confusing because many people arent by nature very angry, so the anger concept might be masked in trade and looks more like frustration or anxiety but in reality it is an anger that is masked, and a trader really needs to figure that part out. How to stop it, in order to do that, its important to 100% objectively look what puts one into the state, then solve that problem by adjusting it correctly.
Revenge trading is basically the most likely outcome if problem isnt addressed.
It is actually quite a simple solution for most cases, for most traders the anger component will come due to not adressing the step 11. Not taking responsibility for your mistakes and shifting the blame is what usually will lead to anger. So addressing 11, will often get the job done.
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