Quite often that dragon of failure is really chasing you off the wrong road and on to the right one.
-Paul Tudor Jones
March has been an incredibly difficult month. I started the month with my worst ever trading day, and have been trying to climb out of a murderhole since. I would have a few small positive days, followed by a big down day. As I finished last week, I was in the midst of a 5 day losing streak (9 consecutive losing trades) and an even bigger hole. I began to realize that I was violating my plan. I was trying to hit homeruns to make up for my losses. I was not taking profits, and small winners were turning into losers. I started doubting my edge and my plan. I even started doubting my ability to trade.
Something wasn't working properly. I decided to read "Trading In The Zone"again, and things started to make sense. I am really focusing on building a Trader's mindset. I thought I had a trader's mindset, but am realizing that I have alot of work to do before I get there. This week, I decided to focus on a few principles to help me operate with a trader's mindset:
1. Anything can happen in the market
2. I don't need to know what''s going to happen next in order to make money
3. There is a random distribution of wins and losses for any given edge
4. An edge is nothing more than an indication of a higher porbability for one outcome over another
5. Every moment in the market is unique
Don't expect anything from the market. Take the information generated by the market, and act upon it. Don't try to predict what's going to happen next.
In order to be successful as a trader, you must be consistent. In order to become a consistent trader, I must:
1. Objectively define my edges
2. Predefine the risk of every trade
3. Completely accept the risk of every trade, or let go of the trade
4. Act on my edges without hesitation
5. Have a plan to take profits, pay myself as the market makes money available to me
6. Continually monitor my susceptibility for making errors
7. I understand the absolute necessity of these principles of consistent success, and therefore, I never violate them
The result was my biggest gaining day ever, over $3K. This was achieved by planning my trades, and trading my plan.
I did make a few mistakes in the afternoon, as I hesitated on a few trades that were part of my trading plan (would have been good winners), but overall, I executed much better today.
The biggest difference was defining my risk prior to entering every trade, based on support levels, and not having an arbitrary stop. My position sizing is also a little smaller, which seems to be working better for me right now.
There will be good and bad days. There will be great and horrible days. I have to learn to accept whatever the market offers for what it is. Tomorrow is always new day.
