Thursday, February 01, 2007

Back on track

It always amazes me how powerful the mind is. It takes what you think literally, keep that in mind and you will do fine.

Back in October I thought at the 20k$ level in my account I will get in trouble. And I sure did. Of course there are reasons, the market got more volatile, but the mistakes I made were the old ones. There was no real reason to get into trouble at all. I could have chosen to go on, to weather these troubles. But I had done the one thing crucial to make sure that I got into trouble.

I had told my subconscious mind, that it was time for a retracement. That 20k$ were the level were my troubles would start. Actually I already had had a difficult time to convince myself, that the 15k$ level (the former high in my account) was one level I could cross.

And sure enough I have fallen back below that level in December as you can see on the chart in my last article.

It took a change in my trading method, a whole new world of insights into trading to bring me back on track. One thing I've learned these last few years. I can fall down, but I will land on my feet and there is a way out of the hole I've dug for myself. No one else but me is responsible for my trading. It is my decision if I make money today. There is an abundance of opportunities, I have to take them to make profits.

There's a saying: You can't win the lottery if you don't play. You can't make profits if you don't risk money. You need to know, what you are doing. You need to have an edge and you need to be able to describe the reasons why you took a trade. After two years of trading I'm able to do just that. No big mumbo jumbo. I know what to do and when to do it. Trading has become a lot clearer to me now. Sure I have losses, we all have. But I have accepted that there is no 100% thing in trading. Even the charts I see on my screen are up for debate, because you might use the same setup, the same timeframe and still have a different looking chart. I tell you a secret: It doesn't matter. We can both win, even if our charts are different. We can both make money, we just need to trade our charts and be sure that we have an edge in the markets.

At the next major level in my account - yes I have set one, even if I know it is dangerous to do so- I might decide to take the money I'm supposed to retrace just out of the account. Maybe that will satisfy this retracement need. But first I have to reach the level. A worthy task for the next 6 months.


John Forman said...

By expecting to have trouble at certain levels, as you have learned, you just put yourself in a position to have trouble. Withdrawing the "drawdown" won't solve that because at some point you have to overcome that barrier to keep moving forward. One thing you might want to do is shift from focusing on a $$ amount and think more in terms of a return. For example, you might have to goal to double your account - to make 100%. Once you do that, you just reset your goal and again go after that 100%. That way you don't think in cash terms, but in performance terms. I know that's helped me at time.

Caravaggio said...

Hi Globetrader,

I'm a regular reader of your blog but have only just got around to fixing up a Blogger profile so I could make a comment (it was easier than I thought!).

I have also experienced psychological issues with reaching certain levels in my account; I know this is not rational but it doesn't stop it from being the case.

As you say, old highs can be tough hurdles for the mind to get around, although I'm so far from my old high that this is not a concern. Another related problem include taking excessive risk after having a very strong run, and this occurs because of a different attitude to capital preservation, applied to fast and large winnings.

These are all games of the mind, but they are hurdles to be got around, one way or another. John's idea of thinking in terms of percentages makes sense, but it doesn't work for me, because I trade in nominal amounts, not percentages. I have found withdrawing a chunk of the capital is the best way to 'reset' my mind. This means I have less fire power in my account at any given time, but I find it can be very effective in helping me strike the right balance between ambition and caution.

I suppose there is no downside in trying everywhich way to avoid these mind traps.