Not sure how many other traders/investors have this problem but nevertheless... I have begun to notice a pattern in my trading. Usually after having a very nice week (10% or greater returns to my total capital) I will squander at the least half of those profits making stupid trades the very next week. I'm sure it's my ego/pride/greed taking control in some way... Do any of you other traders out there have this problem? Have you found a cure for it? This has happened to me 3 times since the year began. It is becoming slightly frustrating. Thanks for any responses. Peace and Success, -Dutch.
I used to have this problem. My solution came in the form of taking a "paycheck" so to speak. Everytime my account gains to a preset value I'll take the money out and reinvest in other stuff or just enjoy it. I've found this helps me physiologically to not start taking riskier trades when I am ahead. This also keeps me focused on reaching a goal, the idea being that I relax after I reach it and not take on any more/less risk. Sometimes my goal takes a week, sometimes it takes a month. Ideally it would be nice to get that whole "ahead" idea out of my mental framework, but, I can't help but keep track of my funds. This is part of my psychological identity with the money and it is a nuisance but I've found a way around it. Hope this helps. Mike
Yep. I was up almost 50% for the rolling 4-weeks trading ES emini and I was pushing for 50. I ended up with 35%. Usually when that happens, there are warning signs... I started tipping my toe outside the boundary of my trading plan days before. The market will convince me it is more than OK. But not paying for health insurance or auto insurance seems to work out great too, it is that one time that's gonna kill you. I was real glad that I regain my senses to take stuff off even though the market did eventually reverse in my direction.
Step # 1) Purge yourself of the notion that you are ever playing with "house money". Even if you made 50% of your capital just yesterday...it is always YOUR money, just as much as if it had taken you 5 years to accumulate.
All traders deal with this to some degree. I find that this is mainly caused by putting too much attention on money rather than the quality of your trades. Once you turn off the P&L screen and stop frequently counting how much you made, you will find that you are more consistent. We get paid for our efforts in currency, but it should not be the main focus of your efforts. You probably find that once you take your first loss, things just get exponentially worse from there as you try to get the money you lost back rather than continuing to execute based on what is in front of you. Good luck.
Do yourself a favor and go spend that money on stuff, instead of piling it in on your trades... This never ending compounding to just let it vanish has no redeeming qualities at all.... You have demonstrated you are a good trader with your profits...go spend it and take the appropriate amount of time off, for your perspective. Trading is not a job of labor, but of mental labor. By the way, I like your 50% formula Michael B. P.S. Make a tangible goal ok?...Take the numbers out of your trading and make it real!
I think your experience is quite common among traders who are only modestly successful, and was the rule for those traders who blew up their accounts long ago and went into real estate (lucky dogs). The key is checking that impulse to enter the stupid trade. If you have traded long enough, you know your winning setups. Once you have the urge to deviate from your established patterns (especially if you are up nicely for the month and you have more money to "play with") you are begging for pain. I keep the Nike anti-motto emlazoned across my monitor to curb such destructive implusles. "Just DON'T do it!!!"
============== DutchDan Sure & certain way to stop some of it ; withdraw some of it, not to waste but invest elsewhere. Also a certain amount of that may not be waste; 10% a week = about 500% year, so while don't like to give ANY back, probably will on that %. There is an insurance premium for overnight holds; any insurance co has premium income, but claims also. Also exactly when are you giving it back????, like a danger for me; includes open price area, not necessarily exactly 8:30 chicago open time, but its an approximate area. Afternoon/closing & last 30 minutes are fine time to enter swing/position trades; but do some shorter trading some, almost never enter last 30 minutes for short term trading , especially hardly ever enter short term trade then. Hopefully you know time wise from records???????
murray again has a valid point...keep a trade journal...but blow the money on wine and women... before I got married...I knew this girl.....oh nevermind.
I don't consider myself traded well... I was just putting on one or two scalp trades in the morning. I wasn't really paying much attention to the money until the profits started tapping me on the shoulder. I wasn't consciously pushing for 50% but I ended up doing it subconsciously. Honestly, it was NOT at all far-fetched... in fact it should have been easy. But as FT71 pointed out, consistency is the key.