How many of you have fallen for the "too many changes" trap? You've developed your own plan, and probably tested it in simulation, and it looks OK. However, when you enter the real world (live trading) you take a few hits. Immediately you start looking at your indicators. Maybe you change a few parameters, or even try new indicators and within a short space of time your trading account doesn't look as healthy.
Time to regroup. Perhaps the original plan wasn't so bad after all. Did you follow your plan explicitly? Time to be honest here - we've all had bad fills, slippage, missed entries and exits, etc, etc and any number of things we can blame the market for.
Rather than blame things for your trading performance, what about having Patience, Trust and Confidence in what you are doing. Change one parameter or indicator at a time and retest it. Remember though, most indicators and parameters will work at some time. If you change too many you will only end up confused.
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This is so true and I suspect all traders experience it. I constantly keep trying to improve my system, especially after having it smacked around by the market, but almost invariably I find the original works fine as long as I follow my rules. I guess it is natural for us to strive to build something better (better cars, better computers etc) which requires us to break or at least challenge the rules. In trading the hardest thing to do is follow your own rules - perhaps we need to be more like Mr Data in Star Trek who could turn off his emotion chip.
Boy, I couldn't agree more. The funny part of the whole scenario is you know that doing this is going to get you confused and yet you still do it. Always trying to find the perfect setup,or indicator, which just doesn't exist.
Meggs well said it is my thinking that a lot of traders fall into this pit of changing things after they take a loss. they go to look for a new indicator that protects them and they add more and more or change settings over and over.
the truth is you cannot win every trade. you probably can not win most trades. realistically you can probably win half of trades. and of those half the way to make money is by making sure your profits are bigger than your losses.
"Let us be thankful for the fools. But for them the rest of us could not succeed." - Mark Twain
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The funny this is there is nothing you can do or change to make a trade a winner. Forget about tweaking your indicators or system or the rat will beat you.
ALL YOU NEED TO KNOW ABOUT TRADING
Price either goes up or down.
No one knows what will happen next.
Keep losses small and let winners run.
POSITION SIZE = RISK / STOP LOSS
The reason you entered has no bearing on the outcome of your trade.
You can control the size of your loss (skill) but you can't control the size of your win (luck).
You need to know when to pick up your chips and cash them in.
"If I only go long, I can't always be wrong"
Sooner or later, I catch the big one.
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“Since your mind is your most valuable asset and your most valuable lever, you need to be careful what you put in it. Sometimes it is even more difficult to get rid of thoughts and ideas that are already in your mind than it is to learn something new” - Pg 119 WHY WE WANT YOU TO BE RICH
Last edited by TheRumpledOne; September 6th, 2009 at 11:04 AM.