Monee, Nice post on a very good thread. Over the years, I have had to deal with all of the above (A-F) scenarios (and the affiliated psychological feelings that are brought into play) at least a few hundred times. However, what hurt me the most (financially and psychologically) would be the next possible option if I were to continue with your list given above. G. I pass on a trade that follows my rules and it turns out to be a (huge) winner. This scenario used to make me so angry with myself that I would start making really bad trades. I hurt myself not only by missing the sizeable profits that my entry signal would have generated but also by entering a series of foolish revenge trades that almost always resulted in big losses (because they were generally against the trend).
My impression is that there are a few really big games going on right now on the internet. I haven't paid much attention to where they are at-- possibly on Pokerstars or Ultimatebet. These include some well known names- Phil Ivey is one, and another is a player who goes by the nickname of SpiritRock, who routinely win (or dump) 25K a day or more. As I say, I can't vouch for this info myself, but I see references by other people to these games in various internet poker forums. Best, Larry Phillips
Also when the market makes a bigger than a usual move... it creates some stress in the observer... whether you are in it or not. But if you think about it... this reaction is merely perfectionism and crowd madness. One can get hurt by several ways: A) "I knew it would go up but now the market goes up too much. It has to come down (or I will feel even more left out)! Let's go short." More likely than not, it does not go straight line up and straight line down. This is a high risk entry... usually way too early. B) Volatility expansion follows by volatility contraction. After a big move with pullbacks/extensions, the market consolidates into chops. Trading like another big leg is right around the corner (hoping for the drama to continue) will most likely get whipsawed to death. In both cases, I feel left out (lonely factor) and I start telling lies to myself so that I can participate outside of my parameters with the crowd. The bigger the move, the more erotic the dance, the more I should stick with the game plan despite the ego needs. Or one might end up with a hairy man in disguise after the dance.
Agree with you .Breaking rules is bad. Even an occasional winning trade that broke the rules does not change the fact that if ones rules are sound they will increase the probability of winning trades. Getting rid of the excitement and even stepping back and having other interests in life besides trading has been very beneficial to me.It avoids me from becoming obsessed with trading which led to rule breaking.
I found that my largest losing days are fighting a trend day. Now if my analysis dictates it is a trend day and I am not in, and unlikely to get a setup, the computer is shut down till 4:00. I also set a maximum of 2 trades per day which will avoid the disaster days.
Some thoughts from W. D. Gann: "I can give you the best rules in the world and the best methods for determining the position of a Commodity, and then you can lose money on account of the human element, which is your greatest weakness. You will fail to follow rules. You will work on hope or fear instead of facts. You will delay. You will become impatient. You will act too quickly or you will delay too long in acting, thus beating yourself on account of your human weakness, then blaming it on the market. Remember that it is your mistake that causes losses and not the action of the market or the manipulators. Therefore, strive to follow rules, or keep out of speculation, for you are doomed to failure." "You cannot make money by trading in the market every day or by getting in and out every day. There comes a time when you should stay out, WATCH and WAIT until you determine a DEFINEITE CHANGE IN TREND. Long periods of rest and relaxation protect your health and help your judgement which will result in profits later." Charles
Marty Schwartz said: "Do you rather make money or do you want to be right?" There are always the risk of losing money and the risk of feeling stupid. Lao Tzu prefers stupidity over exposure (exposure can get you killed).
Gann is an interesting fellow. At the first glance, the evidence would have him as someone selling mythology (most of his stuff can't be serious)... but then I look again.... I like a thing or two... but still no logical basis why they should work nor historical evidence for his stories... and I do not want to get into his astro-planetary harmonics for answers... What's your feel for Gann?