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effect of gains and losses of previous day on next day

Discussion in Psychology and Money Management

Updated by Big Mike
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effect of gains and losses of previous day on next day

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  #1 (permalink)
phx AZ US
Experience: Intermediate
Platform: sierra chart
Broker: Infinity
Trading: es
tradersam's Avatar
Posts: 211 since Feb 2010
Thanks: 479 given, 266 received

I see a pattern where I am unduly affected by previous gains and losses. For example, When I was trading live, I was doing ok ( i did not last long in the market btw)....however I was BE for some time with some small gains too.
I had a big win day ie. I made a lot of $$$. I did not recover from that. This is shocking. I thought I will have trouble recovering from a big loss day ( That came shortly btw....revenge trading was the excuse but that is for another thread). But I blew out my account shortly after that. I did not even do good on SIM for about 3 months after that.

So what do we do....
1. be extra cautious after a win day
2. take some days off from the market
3. remeber all your losses
Did anyone here have same issues?

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  #3 (permalink)
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This is why you need a proven system that you've forward tested in a live market.

Then you can fall back on to your data, your recorded evidence of the method and its success, and simply analyze each trade by comparing it to your historical tested data.

If you find psychological mistakes in your order execution, like moving stops, exiting the trade too early, over trading, etc -- these will all show up in the comparison because they will appear to be out of the normal set of results, like if your normal result is a 2% stop, and you've got a trade that is a 5% stop, then clearly that is not normal.

These kinds of things will help gear you psychologically to do the right thing by building confidence in your system and teaching you to look at large groups of trades, 10, 100, 1000 trades and not go crazy about every single individual trade -- and more important every losing trade -- which has a tendency to negatively effect your psyche, and cause you to start making rash decisions or changes to your methodology.


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May 18, 2011

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