Hello, all, I haven't read a how-to trading book in ages and can't recall if this was ever covered, but I'm curious if complacency in (discretionary) trading is a common pattern/problem. A common pattern with me is that I'll fund a smaller account and start trading on a shoestring. I know I have to be very careful and cautious, so I make sure to do proper preparation, use good stops (and take them) and stay small. Typically, I can double my account or more and racking up 15-20 winning days in a row is not uncommon. Then, what invariably happens is that I start to get complacent. I start thinking it's easy and that I've figured it all out and I'm getting sloppy on my analysis/preparation. With my account now being bigger I start thinking I have a cushion of profits and that I can give my trades a bit more room to breathe. Hell, what if I start trading the overnight session as well and earn money at an even faster rate? Surely that will take me quicker to my goal of becoming an independent trader? Now, it's midnight in Norway and I should be hitting the sack, but instead I'm up watching the weekly futures open instead of sleeping and can quickly rack up a loss trading during a period where I really have no edge. I also start putting on trades while multi-tasking. So, what predictably happens is that I'll take a bigger loss. No biggie at this point, but often it can be enough to rattle me. At this point, I'm focused on the money and want to make it back to equity highs, not necessarily afraid of taking bigger risks to do so (since I'm playing with "house money", right?). Now, this can work out, but if it doesn't, I'm even deeper in the hole and the losing streak starts and can cascade. Basically, when I start doing well, I stop doing what caused me to trade well in the first place. I think complacency is a word that covers it. Now, maybe it's possible for me to stop repeating this pattern, although I'm starting to have doubts. The solution seems really easy of course. Just curious if this is an issue other traders have faced and ultimately conquered. Thanks in advance.
Sustainability is a serious problem with discretionary trading. I can go 20 days also and then fall down. So identified the largest mental burdens. e.g watching every tick, or searching for complex XYZ. Then eliminated them via automation. I estimated it would take another 12-18 months to fully automate ( 1/2 to code, 1/2 to debug and test) . So I opted for what I call "Trading on Rails". The largest mental burdens are automated. The most difficult to code, but still easy for a person, are manual. Entry and exit signals are well defined. Actions upon signals are well defined. By "well defined", I mean the technical term in logic, i.e. something that is expressible in Boolean logic. So the result is that I can only do certain things, i.e. I have to stay "on the rails". There are still things left to do, for instance, optimizing the "rails" to coax out larger gains, risk adjusted. It is still a work in progress but seems to be working well so far. To me Indicators are an (incomplete) extension of Price behavior. And Automation is an (incomplete) extension of Indicators and Price behavior. Check back with me at the end of the year! BTW I would not call it complacency but fatigue and inability to stay on point, razor sharp, ALWAYS.
Well, the reality is that your primary income is not from trading, so that, in itself, can create some complacency, lack of focus, or lack of discipline. Do you have a defined trading plan which lays out your process and rewards and punishments for not following the process? I mean, what if you had to send @destriero money for each time you didn't follow your process?
I changed my focus from winning and losing to whether I followed my process. A good trade can have a bad outcome.
Good Morning Laissez Faire, I admire your post. I wish I can help, but I honestly have no answer for you. I just do not know. We all have to figure this out.
In my experience the market is always looking for a way to humble you. You gotta stay vigilant. Early in your post you said you honor your stops but later you said you "took a big loss",so apparently you didn't honor your stop on that trade?
Sounds like something many poker players experience in their career. I got no solution for it. I just know it is likely linked to dopamine exhaustion which then leads to complacency right after a huge win or streak.
Agreed. Yes, but no rewards or punishments for not following the process. Should there be? Usually, I'd drink to celebrate a good day and drink to forget a bad day... Right. I think that's good advice. Just like a good trade can have a bad outcome a bad trade can have a good outcome. Those may be the worst. Well, if you read the thread the point is that I get complacent/sloppy after initially doing well. So, yes, I'm very careful and cautious initially, but start getting more reckless after initial success. The only rule I'm proud to say I never violate is that I never average down. Ever. Can't remember the last time I did that. I have a rule that I can size up beyond my regular size by adding to a winner assuming that the add-on gives me a good enough average size that I can exit the entire position at breakeven or for a tick. I follow this to the tee at first, but some of my larger losses came from violating this and taking a full stop on a add-on trade. Could be. Never played poker seriously. Was just curious if this was something traders here actually had dealt with and if it's a common problem in trading or not.