Saturday, September 1, 2012

Negative Gains.

Once again, another marginally profitable week. No obvious errors. So I'm avoiding the seductive forces of Outcome Bias and declaring this week a good one.

So many people are focused on "making money"- busy comparing pip totals with the next person, or their personal goals. I've learned, through trial and error, that you can't force or expect the market to do anything for you in any one trade. Trying to do so dismantles any edge you might have. The best we can hope for is a statistical probability over numerous interactions with the market.

With that in mind, I do my best to place my focus squarely on risk management, on trying to lose as little as possible when things aren't going my way, because that's how we stay afloat for the times when making money comes "easily".

You can't sail if you sink!

How will I feel if I lose this trade? Will it throw my subsequent decisions off track thereby making it unwise to continue trading? Those are the types of question I ask myself to control my emotional risk. Especially important for Discretionary Trading.

When you don't lose money, you gain what you didn't lose. So congratulate yourself for that loss that didn't occur! It results in the same positive change in equity as a gain of the equivalent size. The same idea is also true for the age-old trader vice of needing to do something. I've found that a simple change in choice of words/thoughts does the trick: instead of saying, "I'm not doing anything" try "I'm doing nothing". That way, you make it an active choice to exercise a passive action.

"Don't just do something, sit there!" ;)

1 comment:

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