I see lots of great advice and we all agree they are important:
- Hide your Profit and Loss so you aren't focusing on profit "result", but always remain focused on the trading "process". Write it down and keep it handy.
- Reduce the trade size and trade within your comfort zone based on the size of your account. Somewhere less than 2-7.5% of total account value. The longer "time" in the trade the smaller the trade size should be.
- You must have a mentor or high quality trading group.
Here is my story... I too can trade with tremendous success in a simutrade or challenge environment, but become "emotional" in a live account and fail due to "mental" mistakes.
I read books and listen to lots of self help with no success. The only way I have been able to deal with and leverage my great simutrade statistics in a live account is to extremely and deliberately ask myself this question before every entry, "WHAT WOULD MY BOSS DO OR SAY?"
Trading should be treated as a business, not a hobby. The ultimate mission of the business is to make cash, but the daily process is what gets us there. The premise is if I am an employee who answers to a supreme authority (boss/CEO), I may be rewarded with a bonus for great performance (good trade), or suspended for not following the rules. We must play by the rules and follow the process, or something less than desirable will happen. In this case the boss/CEO is YOU. It is to easy for you the employee, to convince you the CEO, to be lenient and relax the rules. You must police yourself.
Well, it worked for me. I still get crazy sometimes and make-up my own rules. If I break my rules or violate the process, I have to suspend myself from trading for a couple of days. It requires a "mind reset" or it will be repeated until the mind has been reset. Only then I can get back to the good business of treating my business like a business.
Sounds easy... it's NOT.
I wish you lots of luck and prosperity in your journey to profitable trading.
The following 5 users say Thank You to Kimsgoomer for this post:
I recently watched a webinar. There was a very interesting take on discipline which I'd never considered but makes perfect sense to me.
Discipline is just understanding that you have a limited amount of self discipline available. The reality is, no matter who you are, you'll make bad decisions at some point. I'm sure others have experienced when you're on a diet and you've had a long day, you know you really should be eating something healthy, but take out is so much easier.
The difference between professional's (athletes and other high performing occupations) and everyone else, is that professionals know when to back off. At some point, you run on empty and your body forces you to take a break in the way of making you sick.
So think of yourself as a battery, there are activities that replenish your battery (sleep and meditation) and activities that deplete your battery (exercise, trade decisions, diet, work, alcohol etc). When you sleep 4 hours, you're only half charging your battery.
By understanding where in the battery level you start to lose discipline, what drains your battery quickly (get rid of it), and by structuring trading and placing it towards the period where you have peak battery, you're minimising the chances of making poor decisions or letting your chimp brain take over.
What do most traders do when they have poor performance? They push harder, they work longer, when in all likelihood, they'd be better off backing off and taking a break.
One of my non-negotiables is sleep. I have data that proves that I trade considerably worse if I don't get at least 6 hours of sleep. So I have a rule to not trade if I haven't slept 6 hours.
The following 8 users say Thank You to creamyyy for this post:
Meditation is the cure-all according to many, but I had never really thought about hypnosis. I've heard it talked about, but I never really thought about it seriously. After reading your post I decided to research it a bit and came across some interviews with Dr. David Spiegel from Stanford (Hubernan Lab / Rich Roll) and this was very enlightening. What really struck me most was the description of what the state of hypnosis is, what it involves, how it focuses the mind to the exclusion of everything, and how the mind can become highly suggestible and how people can get taken over by real or imagined states and act out all kinds of physical, physiological or emotional conditions otherwise not known to them, in sum the entire description of the state of hypnosis, all of it perfectly describes states I go into when I am trading, particularly those from which I awaken absolutely amazed at what I have done for the thousandth time after so many resolutions to the contrary and every conceivable risk management countermeasure. This, in and of itself, was an incredible realization, because so often I have berated myself, as if I had been in control and simply gotten angry, revenge traded, or whatever, or subject to primal instincts, or loss aversion but never really, totally and absolutely without conscious agency the way one might be under hypnosis. It just threw everything into perspective. (This is why I mentioned in a previous post that risk management addons are only somewhat helpful. In the end, under hypnosis, you can very well dismantle or circumvent just about any technological add-on, just the way for every new computer security measure there is a hacker who will figure out how to get around it. This is not the ultimate solution any more than straight jackets are).
It certainly makes sense that some of the very good traders around that I am aware of only take very few trades in any given session, talk about taking one or two setups over and over. We always think of it as simply being 'selective' etc., but if I start to think about it in terms of how can I avoid becoming hypnotized, literally, it gives me tools and ways to manage my screen time, stepping away, and other mind management. Thus, I am no longer doing these things because I know it's good to take a break, to be calmer, separate from emotions, and so on. These are all great and actions that one would logically take as countermeasures. This I have known for a long time. But now I have a better way of understanding what I am actually dealing with, how I can literally become hypnotized, clinically hypnotized, as it were. I guess it really gave form and dimension to the shapeless enemy I have long grappled with. You can fill in all the famous quotes about how knowing the enemy is half the battle here.
The following 4 users say Thank You to bwolf for this post:
The best way to handle discipline from experience is setting a limit on your broker for EOD drawdown. If you reach $200 in DD for example, you can’t trade anymore for that day.
That would help you from overtrading or digging a deeper hole that you can’t get out of.
The following user says Thank You to massacre for this post:
I like to write my strategy down before I place my first trade. I also try to visualize what I am going to do if the market moves against me. A daily drawdown limit with the broker is also good as well. One of the hardest things for me is to exit a losing position. All I want to do is hold my losers until they turn to winners but most of the time this only leads to deeper losses. I now figure out how much I am willing to lose and exit when that threshold is reached. Then I take a break of at least 30 minutes before I come back to the screen.
The following user says Thank You to blackgrey45 for this post:
Im currently struggling with this. I'll wipe out weeks of gains in just one day. It always stems from revenge trading after a handful of losses in a row. Does anyone know if a good trade management tool for NinjaTrader that cuts you off from taking anymore trades after hitting a max daily loss? I am trading with prop firms and I know there's a way to set a max daily loss in rithmic. However, the problem is Rithmic doesnt notifiy me once i've hit my max daily loss, so i dont find out until I try to take a few trades and it cuts me off (but yet still will rack up comissions). So just curious if there's better options out there.
