Trading advice for avoiding losses

As a struggling trader you can safely assume that there is a very cozy and intimate relationship going on between your losses and your self-control.

Why is it safe to assume that? Because trading all boils down to your ability to execute your method and money management strategy. If your method works and you execute it properly you will make money over time. It’s the law.

If your method doesn’t work and you are still trading it - you are out of control.
If your method doesn’t work and you don’t realize it because you can’t tell what the problem is - you are out of control.
If your method works and you can’t execute it - you are out of control.

Bottom line if you are losing consistently - you are out of control.

Becoming consistently profitable means getting a grip on your self.

Its pretty scary to realize that you are out of control - at least it was for me. I’d had a successful career and had always seen myself as very capable. After two failed attempts at full time trading, on my third go I’d been very thorough in my trading research, in finding a method, in testing it. To find out after all the preparation, that when it came to trading real money I turned into a complete nutter, was disconcerting to say the least. It was like "who the hell is this guy"? I could sit there at the beginning of the session and repeat a hundred times "today I’m only going to enter a trade when my system gives me a signal" and still two minutes later be in a trade that wasn’t signaled. I was an overtrading junky. I couldn’t control myself.

So whatever your particular issue or basket of issues is, you are going to need to figure it out before your become profitable. And thankfully there is plenty of help out there once you can acknowledge that you have a problem.

Something that surprised me when I started working on it, was that my self-control woes weren’t rooted in trading, as I thought they were. They were actually just regular life issues that were flowing over into my trading. For example I discovered just how much I like to put off doing things that I don’t like. In trading, this habit of delaying pain meant that I found it very difficult to be disciplined. If this rings any bells with you, I suggest you read M Scott Peck’s classic "The Road Less Traveled" to get a better understanding of delaying pain.

You may well find that it’s worthwhile for you to invest in seeing a trading psychologist to help you identify your issues and develop strategies to work on them. They are tricky (not the psychologists!!), and sometimes having someone objective to help you see them makes it much easier to resolve.

And let me tell you, it may seem like a lot of money, but I really hope that by now at least some of what I’ve said in my other posts about the relative importance of mindset has sunk home. If you’ve spent hundreds of dollars on your methodology, then it is equally, if not more important that you consider making a similar investment in your mental preparation. Because once again, it’s no good having a great method if you consistently sabotage it.

Resources:

http://www.brettsteenbarger.com/articles.htm

In the next blog post: The struggling trader’s guide to regaining optimism

Are you looking for a consistently profitable trading system? Check out our preferred cycle trading system: