More on ‘The next trade is more important’

I decided to relook again my previous posting on “Next trade is more important‘. I discussed briefly on experience of having a string of winning days. Now I am looking at the losing experience. It seems to be a common problem among traders. Well, I made the same mistake on tuesday’s trade as well. Coincidently, ugly was having the similar problem yesterday.

What is the relationship between my E-mini S&P trade and Gold trade? Absolutely NO. But, at the psychological side, trader has a tendency to relate them. This is similar to the theory of points and line.

In the same dimension, it is easily for one to connect two points and make it a line, though these two points are, in fact, have no logical relationship

I find it to be so true in trading. When I had one or two losses in a row within a trading day, unintentionally, I become cautious. I do not want to lose money again and I do think that the probability to success today is low, since I had made two losing trades before. So, I assess the third trade in a different approach, (though I still think that I am following the darn trading rules!). I am eager to take profit now when I see the candle is narrow at the top of chart, (well, that’s lucky if the position is in the money) or I am moving stop loss to break even point far too early, just to avoid losing money, again. Oh, not again!

I do not have a concrete treatment for this kinda of psychological problem, since I am not a psychiatrist. To me, the best solution so far, is to stop trading for the day if I have two 1-R losses in a row. Because, I KNOW MYSELF. I am just not cool enough to make another trade immediately after 2 losses.

Anyway, market is always there, let’s fight another day.

About Gav

A Father, Husband, Trader, and Blogger. A serious coffee addict. Started trading since 2005, trades Futures and FX.

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Comments

  1. Yeah, theoretically all you need to do is differentiate between two cases: 1) Something is wrong with my trading today, and I should quit 2) I am trading well, and these are just normal losses. But, I find that after two losses, I am in no frame of mind to make that determination accurately. So, I usually have to take a break. I would rather not trade than trade in fear.

    I have gotten to know your blog over the last few days, and I really like it.

  2. Yeah, theoretically all you need to do is differentiate between two cases: 1) Something is wrong with my trading today, and I should quit 2) I am trading well, and these are just normal losses. But, I find that after two losses, I am in no frame of mind to make that determination accurately. So, I usually have to take a break. I would rather not trade than trade in fear.

    I have gotten to know your blog over the last few days, and I really like it.

  3. Richard: Thanks! I am a frequent reader of your blog too.I like the way you prepare yourself to trade.

  4. Richard: Thanks! I am a frequent reader of your blog too.I like the way you prepare yourself to trade.

  5. Good post Gav.

    A couple of things may help. Create rules for when and how you can move your stops. I found that moving my stops before being in the trade for an hour was making me miss moves by stopping me out too quickly.

    I don’t know if you saw my links about the “Law of Attraction” but I think this is a classic example. When we focus on not losing we creat losses! It’s often better to accept the possiblily of the full 1R loss and then focus on maximizing the gains.

    It may also help to define your maximum loss for any 1 day. THis is an idea I got from John Carter’s book. That’s part of his business plan. 3R is my “cry uncle” point. If I lose that much I wind things down for the day and just wait for an “easier day” to try to make my money back…

    BTW, the link to your original “next trade is more important” post is bad, you need to drop the “trackback” from it.

  6. Good post Gav.

    A couple of things may help. Create rules for when and how you can move your stops. I found that moving my stops before being in the trade for an hour was making me miss moves by stopping me out too quickly.

    I don’t know if you saw my links about the “Law of Attraction” but I think this is a classic example. When we focus on not losing we creat losses! It’s often better to accept the possiblily of the full 1R loss and then focus on maximizing the gains.

    It may also help to define your maximum loss for any 1 day. THis is an idea I got from John Carter’s book. That’s part of his business plan. 3R is my “cry uncle” point. If I lose that much I wind things down for the day and just wait for an “easier day” to try to make my money back…

    BTW, the link to your original “next trade is more important” post is bad, you need to drop the “trackback” from it.

  7. Michael: Thanks. I have corrected the link. I am reading Cater’s book now. And I am going to have a look at Law of Attraction. Have a nice day! 🙂

  8. Michael: Thanks. I have corrected the link. I am reading Cater’s book now. And I am going to have a look at Law of Attraction. Have a nice day! 🙂

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