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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.
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.
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 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.
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.
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.
The first one is kinda costly. The second one does basically everything the first one does and is a one-time purchase for much less. The third one is helpful to give you notifications along the way, but basically useless as a risk manager as it doesn't terminate a session.
If you use the second one you need to use the password feature to lock yourself out and do a long complex password you can't remember and use a phone photo time lock app to take a photo of it and hide it for as long as necessary, and if you have a back up your computer, use a file hiding app with the password also set to be hidden for as long as necessary. If you have access to the password or can retrieve it during the session it won't work. Speaking from experience, if you have the kinds of issues that require this stuff you will most likely leave some loopholes open to always manage to get back into the risk manager somehow.
I should also add if you are trading evaluations for funded accounts, then you need to get Cold Turkey (https://getcoldturkey.com/) and lock down your Rithmic app during the session. And if you have multiple computers you need to download Rithmic to all of them and set Cold Turkey on those too. And even with all of that, you may find ways to get around it, as ultimately very little can keep you out if you are really determined. But with all these things in place, you might be able to make it work. It can take a long time and lots of losses to get it completely ironclad. IMO it's better to find a system that promotes emotional sobriety.
This is the issue with the most of the traders experienced and novice as well.I have experienced every single hurdle a trader might face.Here are few reasons of this behavior and remedies i did to overcome this weekness.
Market is dynamic it keeps changing its behavior periodically. Time span of change varies form few minutes to weeks.Please be adaptive to market conditions. Only one style of trading does not work in day trading.Have at least three trading strategies.
1-For range bound price action.
2-For steep trend price action.
3-For trend up or down with swings price action.
When we are having high win-rate we forget about Law of large numbers which states when you do some activity over a prolonged period of time our results tend to average out.Please read my post regarding risk management in this regard.
If we do not have a proper risk management strategy with positive expectancy no matter how good we are doing short term we will end up loosing long term.
Here are some remedies I used to get rid of this behavior.
1-Fix your daily profit goal for every day and stop trading once your goal is reached for the day.
2-Fix your daily loss Limit as well and stop trading if draw down for the day hits daily loss limit.
3-Daily loss limit should not be more than 1.5 times of your daiy profit goal.
4-Keep an eye on Market context big picture for the instrument you are trading and be aware of the scheduled funadamental news events and geopolitical situations.
5- if you are having bad day start reducing your position sizing as you reach half way of your daily loss limit.Let us say when you normally trade with Standard E-Mini contract now go 5 micros instead of full e-mini till you recover your loss and then you go back to normal.
This is one of the biggest reasons and is about 99% of the times the cause of failure when we have a relatively bigger loss trade we become reactionary to the market and start increasing the position sizing in pursuit to recover the losses quickly there by ruining the months efforts in few minutes.
6-Look at few instruments and select the most trending for your trading for the day.
7-Please do not play naked trades , I mean do not trade without stop loss no matter how many times it is being hit.
8-Do not trade if you don't feel fresh due to what ever reason.
I can go on and on for days to give suggestions but I will leave it here for now and re-iterate the most important once again.
Restricting daily loss limit and controlling the position sizing solves more than 99% of this issues.
Hope it works for you, Pls try and be persistent with it you will see the change.
Don't forget Trading is a marathon not a sprint race.
