No guarantees in trading, but the rules do help us move towards success and away from failure, no? How else can we consistently prevent situations like your recent disciplinary lapse and resulting large loss, and any ongoing issues it may be causing for you now? Do you think it's ok to break them if it works out to be profitable? Is it still ok if breaking them causes a big loss?
Thanks for your thoughts. For me personally, and what I have learned from my experience, it is always better to wait for tomorrow's setup, as the potential risks of revenge trading/overtrading far outweigh any potential profits for today. It is through not following max drawdown/risk management rules, that I have overtraded and revenge traded, and destroyed accounts.
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I have not followed what's going on but I take it you had a bad day and this is what you're referencing. Having had large down days has also served the useful purpose of removing fear for me as well. Not that I'm advocating a large down day for this purpose mind you, but afterward you kind of realize, like... it's not the end of the world. I don't have a new disease, my dog still likes me, and my family still loves me and is supportive of me, I haven't gained weight, and things could be much worse. And maybe most importantly, "that's not who I am." Maybe it's foolish what I did, maybe my behavior was not mature or ideal or (fill in the blank), but that is not me. I am not defined by my largest winning day or losing day. My identity will not be wrapped up into a single day or week's performance.
As for rules, "always follow the rules no matter what" is echoed by pretty much every vendor and retail trader out there who can't trade their way out of a paper bag, so I put that kind of thinking into the "never add to a loser, never move your stop, always plan every trade before the day starts" category -- well-intended advice that just isn't practical 100% of the time.
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So I guess I could fall into the category of the retail trader who can't trade their way out of a paper bag, and would like to improve. In my own experience, I have found that breaking rules, adding to losers, moving stops, taking unplanned trades, etc are things that have hurt me much more than they have helped me. But I am open minded, and would love to hear from a more experienced trader on why/how/when they could be helpful.
Yes, rules are to be followed. The point I was making, if there is one, is that the price action was so clear in that moment that I felt stronger about it than normal. If it was ok to trade again after waiting a pre-defined time period, as in the next trading day, then taking another trade was allowed in the "future". The conditions that were in front of me seemed of higher value than the "rule" of how long I should wait.
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Good point. Thanks Josh. The short version of the story, I had a battle with my ego and lost.
Right. Rules alone are not everything. Intuition is not something that can be taught, or identified as a rule. I do not have a rule for when I see something that triggers a strong feeling of certainty. What happened was unusual price action in my mind, relative to recent history, and the signal of breaking the top was highly significant to me. It is just something that called for action on my part, regardless of any pre-defined rules, as I watch these markets every day of my life almost, and what I saw, what I felt, was an opportunity not to be missed.
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FO, that was not at all my intention, I wasn't singling out anyone. I think Gary's example is a perfect one of how his good experience allowed him to benefit from his intuition rather than allowing a rule to bind him unnecessarily. I'm not advocating breaking rules, or doing any of those other things for you or anyone personally. Take what Gary said:
Exactly -- the "time out" that a max daily loss is supposed to accomplish is only logical and helpful if indeed it does cause one to "cool down" and get his wits about him. You could wait until next WEEK and still trade poorly, if things aren't right. Or, you could gather yourself and in 5 minutes do wonderful. So, having a generic amount of time between losses may work as a general case, but passing on an opportunity just for the sake of following a rule, in effect, negates the value and principle behind that rule. If one knows oneself well, it can work, if not, it could be more harmful.
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