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How do I stop getting in my own way?


Discussion in Psychology and Money Management

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How do I stop getting in my own way?

  #41 (permalink)
metobi1
Lagos, Ikeja. Nigeria
 
Posts: 55 since Apr 2012
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Rock Sexton View Post
When you mentioned "psychologically daunting" that's exactly what it is. I didn't properly build my way up into being able to mentally handle it. Within the past couple of months I tried to "force" myself to get used to the idea of bumping up my typical 3,000-5,000 shares sizes to 7,000-10,000 shares.

Ultimately man, I'm getting closer and closer to the realization that to get over this hump I'm going to first need to dial down the worry I have about reserves. Do what I have to do to supplement myself to try and eliminate as much mental noise about that as possible. The second is (again) the fact that I still need to work my way up slowly in terms of position sizes. Just not ready to handle those reigns until I've actually started executing my system the way it's supposed to be. I've been putting the carriage before the horse.

I think @Bermudan Option is right on the money to have asked what capital hence risk sizes you are used to and if you built it up.

This happened to a friend of mine(actually my first Forex teacher), he had been trading for a while and had been consistent but with growing small accounts $2k to $5k, then he withdraws and starts again.
At a point he decided to become a fund manager(the beginning of the end), before long people all over funded his account and he was trading an account of about 80k. Now that means from a 2% risk per trade of about 40 to 100 dollars to a 2% risk per trade of 1600. 1600 - 100 = 1500. That is how much more he was risking, about 1500% sudden increase in risk.
He soon had a bad period and a drawdown of about $15k, this was not uncommon in his trading experience as this was just about 19% of the capital. But 19% of even his former max capital 5000 is just $950, compare that to $15000 and convert it to naira(for he was in nigeria) and you would have found out why he nearly had a heart attack. He had to go back to demo trading for a long while before he got his confidence back enough to trade his old routine.

The point here is, growing your account and increasing it a little at a time, especially with money sizes you are used to is far better and I believe would help in facing the usual trading risks without reservations.

So your past salary(s)/business gains, have been a maximum of $2000 per month, then when increasing your capital with external funds, you might want to increase it with increments of $2000 or even $4000, as you know that you can easily make that with two months of work, and risking any amount of it may have little or no psychological effect on you.

So from a 5k account you grow to 8k, then get 3k fund to 11k trade that for 4 months, grow to 13k, get another 5k fund or even 7k fund to 20k etc, if you calculate this you will see that it is easier to adjust to increasing risk sizes since you are getting used to the sums at your disposal.

It might seem extreme but you may need to save the bulk sum into an account, and try starting from an overall margin you are comfortable with. Perhaps adding more as you grow in confidence with handling larger sums.

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  #42 (permalink)
Rock Sexton
Scottsdale
 
Posts: 120 since Feb 2012
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Sitting here watching a Mark Douglas video and he touches on something that I haven't mentioned in this thread ......

Even if I know my system generates a high win rate and the odds are in my favor, I do not know the way in which the wins/losses will be distributed.

That is a very important variable as I've transitioned from day trading to swing trading. I'm taking significantly less trades which equates to less possible opportunity and on top of that I have the "time opportunity cost" of 20 trading days a month to make what I need to make doing this for a living. This then has created the mental situation where I'm not accepting the nature of probability. I begin "expecting to win" and to have immediacy in that win .... if that doesn't happen I begin violating my rules, especially if I've taken on more risk than I'm mentally capable of assuming.

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