Whether you like it or not, the only reason we trade (or at least attempt to) is to expand our capital. Okay, it is fair to say that there are other drivers involved, but the underlying goal of a trader is to expand his capital – to increase his net worth. Some see trading as a means to an end. They trade to make enough money to expand their business, or to fund charitable projects. People trade to give themselves a lifestyle, or maintain one, whilst some trade to have a retirement plan. For you, maybe you just want to earn a living without working for anyone.
And those are the drivers. But essentially, the money you make is not even second on the priority list. It should linger like a bad smell near the bottom. The main focus is to perfect the strategy – to enhance the trading method and system. Otherwise, there just isn’t any point. If you don’t believe in your system or have faith in your understanding of your strategy (and the market) you’ll find yourself floating aimlessly between breakeven and the red.
Anton Kreil said “if you watch every tick, you’ll trade like a dick”. It sounds blunt and brash, but it is very true. Humans, as much as we like to kid ourselves, cannot multitask. When we “multitask”, all we are really doing is dividing our attention between two or more activities. This ultimately leads to one or more of the activities suffering. We miss the signals. We fail to see the elephant in the room. We do not see the bigger picture forming because we are too focused on the small pieces of the jigsaw. So what are you paying attention to?
With that being said, we are humans. Our instincts are fear and greed. And when you break it down, all greed is, is a fear of missing out. Greed is a fear of not having enough – a fear of leaving some on the table. It is this fear that means when targets are met, we have no impulse to stop. We have no exit strategy. This means we potentially become more vulnerable to giving back what we make. To thrive, we must first survive. Be willing to get out at a predetermined price level. Be prepared to secure some profit.
I still celebrate the end of a losing streak. I have mini fist pumps when price hits my profit target. Being closed out for a profit is the best feeling. But trading mechanically means, win or lose, I accept it. I am focused on the strategy and system (the playing field). I don’t worry about losses. I reduce my loss by limiting risk (we are, after all, risk managers). In fact, I prefer to trade on my tablet for that exact reason. I can hide my account value while trading so I am not distracted by what the position is doing to my account but instead, I focus on what the charts are saying to me.
Trading mechanically (like a robot) means developing a strategy that you follow every time. The rules are the same – just like in sport. The main rules do not change. And just like in sport, even the best teams lose. They see winning streaks end. But they don’t change the strategy massively to start winning again. Neither do they have a massive squad overhaul after a losing streak. Winning teams win because they focus on the playing field. Not the scoreboard. Traders should learn to do the same. Keep doing the things that work over and over again. The results will follow.
In closing, I believe a trader must build a system and a strategy that allows minimum screen time. Rather than worrying about the positions currently open, a trader should be accepting of the fact that there are two scenarios once an order is filled – getting stopped out (for a loss or otherwise), or hitting your profit target. You shouldn’t have to sit by your workstation fiddling with the platform or twiddling your thumbs swinging between fear and elation. Trade less, trade better.
1. The accomplishment of an aim or purpose. Obviously, from this definition, success is personal. Your success could be considered mediocre by others, but we all run our own journeys in life.
2. Of course, when the market moves decisively in your favour, feel free to adjust your position. Begin to lock in profits and trail the market. It is good to be in a risk-free position. But do so within reason.