Wednesday, November 01, 2006

Statistics

I'm a discretionary trader. Meaning I'm not able to mechanise my trade selection and trade entry and exit rules. I really tried, but failed miserably in real trading, even if back-testing looked so promising.

But for a long time my %-Win, %-Break-even and %-Loss trades remained relatively static.
So this June instead of defining hard trade entry and exit rules, I decided to trust myself to be able to achieve about the same statistic results next month again.

It was a very difficult process for me, as that meant giving up control and relying on my intuition to provide me with a feeling that a certain setup seen on the screen would fit my trade selection criteria, even if I'm not able to verbalise them all.

It was exactly what I had to do to become a profitable trader.

It's nothing to be recommended to a novice trader, as you need a lot of screen-time to train your intuition. For me it took 5 years looking at charts, which today still have features I had on my charts 5 years ago.

If you can compile statistical data about your trading over a long time and you see consistencies, you don't need to come up with a objective trade rule, you can replace it with a trust in yourself to achieve this result again. And you can then build on it and try identifying the areas in your trading which need improvement.

For me it was bringing down the average $-Loss / Trade proving market lore again right: Take care of your losses, the profits take care of them self.

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