23rd April 2013
There are times when you are right, or you have the right idea and you still end up losing money. While today didn’t lose money, the scoreboard doesn’t reflect the overall direction of the stock indices. The room closed at 11 with 3.84% day and one trade clocking up 70 points.
Last night David Paul, the swing trader of the live trading room, called me and chatted about the state of the market. He remarked that in his opinion the Dow was prone to a big move up today. His exact words were: “They have taken it down, flushed everyone out, I think it is ripe for a big move up tomorrow”.
The morning was difficult because the DAX, which is my main trading instrument, was continuing down. I had two attempts at getting on board a move higher. It wasn’t until the third move that the market followed through.
Hindsight is a wonderful thing. I look back at the trade, and I see that I took profit on half the trade after 10 points, while the last part of the position clocked up 70 points.
Running a live trading room is an amazing insight into money and mind. A friend of mine sends me a message during the trading session, after the first losing trade I had and says “We are losing money again. Are you worried?”
The message is loud and clear: no one likes to lose money but if you are hiring an expert in trading to guide you, then you would expect him or her to be infallible. Of course this is not the case. Pro traders have crap days as well. However, what often separates the pro from the amateur is the tough time.
Everyone goes through times when nothing is working. A friend of mine called it the pay-out cycle and the pay-back cycle. The pro however doesn’t change the system when he or she is going through a losing patch. He sticks to it, because he knows that it has served him well in the past and that markets don’t all of a sudden change. The markets are always the same: range expansion, range contraction, and back and forth.
To become a consistent trader is so difficult. Even when you are on a stride, you constantly have to watch your ego. Complacency is a dangerous trait to unleash onto the markets. My friend’s comment about being worried was ill-timed, but I don’t blame him. Many of us come into the market risking the money we had to work for in other jobs. The last thing we want to see is it being pissed down the drain in careless trading.
However, it should warrant a worry that you are losing. It is quite normal. To question the strategy during the day is a cardinal sin. More often than not it is YOU that is the issue, and not the strategy.
I read a great article about fatigue and decision making. The author concluded that the decision making process was significantly impaired in test environments when the subjects were sleep deprived, even if just mildly in sleep deficit.
I have searched high and low for an article about my all-time favourite tennis hero Roger Federer. I heard that he sleeps plenty each night. Maybe that will in part explain his success. As traders, we are all about decision making, so make sure you get plenty of kip-eye.