Wednesday, March 07, 2007

Stop Loss, WHERE IS IT?

I was reading NYSE SCALPERS BLOG today, and he was analyzing his losing trading days and what they had in common, and I think most traders share the same problem, becuase I know I do.

The problem is basing your trades on your previous trades, and trying to get back to breakeven. How many times have you been in a bad trade and said to yourself, "if the price just goes to X.XX then I will be at breakeven". The market doesn't care if your trying to back to breakeven. If you would have stuck to a preset stop loss pt would you be in this situation? That's the problem with "US" discretionary traders. Sometimes we let a trade turn into a bet in order to prove that we are right.
If you've ever watched a professional poker tournament you will sometimes see a big shot gambler lose his feel and implode on himself. First you lose your anger on a hand that you thought you would win for sure, but outta nowhere the guy next to you beats you on the river. What's the chance of that happening again? So you have a hand that isn't as good as the last, but now your behind, so you double up, and guess what is likely to happen? Yep, that was stupid, you should have waited for a good hand, but now your down even more. You can't lose another hand right? Wrong! Kiss your ass good bye!

Trade what you see, stick to your strategy, and forget about what your last trade was or what your P/L for the day is.(easier said than done) It's taking me awhile to switch from trading based off my own gut feeling, to trading based off my indicators and strategy that I have researched and analyzed to work. As each day goes by I see my system working better than my own trades and wonder what if I had just followed my system based off of my indicators that I have designed to give me my edge? It's going to take me time to start trading based off of my indicators, but overall I think this approach overtime will give me a definitive edge that can be applied on a daily basis and allow me to take out emotions from trading and also the big drawdowns that go along with my "gut feeling" trading approach.

Here is a great story I posted on a seperate blog of mine called TRADING PSYCHE that I found a few months ago, which is similiar to the story told in the book LIARS POKER.

Also, here's a good post by Dr. Steenbarger from Traderfeed
that looks at traders and how through experience they stay in bad trades to hold true to thier Convictions. I personally don't like getting into these types of situations becuase I don't like the stress that goes along with it, but when they've happened, I would end up winning by staying true to my conviction.


Subscribe via email

Enter your email address:

Delivered by FeedBurner


High Probability Trade. Copyright 2008 All Rights Reserved Revolution Two Church theme by Brian Gardner Converted into Blogger Template by Bloganol dot com