Taking a 5-10% profit is good in each trade will never go broke. A 50-100% profit will be great but it wouldn't be frequent. Indiscipline will wipe out all these effort in one or two trades. Trading is a grinding process and it wouldn't be easy. It cannot be treated like a lottery where a single jackpot would last a lifetime.
Getting lazy or careless after a winning streak is definitely an issue. The best counter for it is to deliberately adopt a mentality of perpetual caution and cynicism. Always tell yourself that any hot streak you've been on will probably end tomorrow; that the next several trades will likely be losers; and that you're due for a lengthy period of treading water. Heck, you might never make new equity highs again. Doing this keeps you conservative, engaged, and focused on risk. Of course it's no good to demoralize yourself into paralysis either, or talk yourself out of good trades, so there is a balance to be struck. As with most of the "trading psychology" stuff, this is only relevant if you've got a solid profitable methodology to begin with. There's always the possibility that you're being fooled by randomness.
Complacency in trading refers to a state of being overly confident or comfortable in one's trading decisions, often leading to a lack of vigilance and risk management.
I suppose the horizontal axis are trading days. That basically means in the first chart - you made 50% of your starting capital in 14 days. I would want to know first how much of the gains is due to a sustainable edge/skill, and how much is due to 'favourable market conditions'. The reality is probably that 80% of the moves in our account over a 1-month time period trading (of course varies by traders) is due to market environment - and only 20% due to strategy. Its of course a mistake to size up believing all the gain in the first period is sustainable. What happens is you now have a bigger size just when the market environment does not favour the strategy. So in the first period - says 50% up. But +10% is skill and +40% is market. Next period, skill remains at +10% but unfavourable market gives you -40%. Net -30%. Compound by double size, and you are down 50 or 60%. That is a mistake especially if you are trading leveraged (if doing 1 contract on account size of say $5,000, there is no question that is huge leverage). The more the leverage the impact of market volatility (favourable/unfavourable). Since you clearly said you do not double down (my own undoing), the above is my best explanation of what is happening. Only a long term analysis of your trades (entry / exit) can determine how much edge you have. (Normally I take first entry / last exit price on my trades - regardless of size - and see if the average % return per trade is positive over a long period) Of course you could also have a negative from complacency on leverage (meaning the trades taken do not have an edge - but generally those should be break-even in the long run without leverage). Its only you can say what percentage of your trades long-term fall into that category.
Certainly. I've considered it. I think you need to be 100 % honest with yourself to stand a chance in this game. I do know that my approach and risk management tend to change, though. So, I'm cautiously optimistic that if I'm able to get consistent with my approach and filter out bad trades (not to be confused with losing trades) my methodology is profitable. I'd say the challenge with my approach and myself is being able to sideline myself when I don't have an edge or when the market's are not favourable for trading. I've been in contact with a trader who only trades when the markets are trending and will stay out when they're not. Probably he has an objective way of defining trend, but no dobut a large part of his success comes from staying out and only participating when things line up perfectly. I've automated a lot in my approach and much of what I use is objectively defined/generated, but at the end of the day it's interpreted by me and as such is discretionary. That's no doubt a weakness, but potentiallly also a strength. Right. That's an interesting take. How would you define favourable market conditions? Simply something suited to my strategy? All those graphs were from last year. I trade both long, short, range and trend. Good comment, neke. Thank you.
%% I also noticed when i did watch CNBC[not much now] they tossed that word around a lot in bull markets most w hen seemed very bothered when people were not selling much or were letting profits ride. FORBES MAGAzine has some good warnings on 5 Dangers signs on Complacancy.. 1] You are no longer striving to do your best.[Or one knows so little enough about markets , that both a bull + bear market seem ''random''. no offence intended] 2] You are not staying up to date in your field or industry
Does your approach change because of bias going into the day based on your stat model or because of what is happening on the chart in real-time? You could always try to hedge against yourself until you get everything squared away. Program an algo in strategy builder as close as you can to how you prefer to trade. You can probably get close-ish if your preference is momentum/trend. Use that as a benchmark (even if it’s in a correlated instrument) and pay attention to what happened when it or you lose money.
No. I would rather say that the issue I'm talking about here in this thread is that I may even stop using the statistical model and go free wheeling instead. Day 1 - Ample analysis/preparation and careful trading. Day 15 - Getting relaxed and may skip analysis/preparation altogether. I've automated everything I can at this point, I think. I'd love to add an indicator for a more objective measure and to give me objective entry/exit points, but so far I haven't found anything that's reliable enough.
"Complacency" suggest a lack or a lapse in discipline and/or focus, neither of which are options. Sometimes a trader may need a break and it's time to go hike in the mountains, lay on the beach or whatever. But if a trader can not do what he/she needs to do consistently then that trader can not trade.