These were some thoughts shared by Gavin in the Slack group recently, which I believe are a good read over the holidays. Enjoy!
I've been very focused on my trading execution recently, and results have been consistent (8 profitable weeks in a row). A lot of my key processes have been on auto-pilot due to positive habit formation and growing confidence in my strategy.
My previous issues like risk-aversion and hesitation when trades are setting up (due to too many things I'm looking at and lower confidence in my reading of market flows) have settled down. I have just been thinking about my trading rather than unhelpful things like needing to make money and being in too much of a rush to develop my track record. My hot streak also coincides with securing a small side-income stream which has created a lot of calmness and I am much more comfortable with sitting on my hands and not wanting to constantly be in the market.
I've also been managing my emotions better, such as observing what I'm thinking at times of stress, and rather than reacting to chemicals my body is producing thinking why I am having these thoughts. Rather than making impulsive decisions I have been stepping back for a minute and reviewing the situation. Based on the main fact that if I am in a trade I'm likely biased and not acting objectively. Rather than creating "delays and lost pips" this is adding to my growing calm and logical decision-making process. The voice in my head always used to be quite negative and aggressive, but recently it's much more supportive and logical.
When deeply reflecting on my main areas of weakness recently there are 3 main aspects I am making slow and steady progress with:
1. CUTTING WINNERS TOO EARLY - this is often just to feel better rather than any logical reason. Rather than focusing on giving back profits (the negative) I have been focusing on how the trade could progress (positive) and how that would feel, but fully accepting there is no way to know what will happen.
I think lots of retail traders including me often irrationally think a trade will go straight to target when entering, then flip and think price will go straight to the stop-loss during a natural retracement. Relating to our natural programming of risk aversion and survival (moving towards pleasure and away from pain) and several cognitive biases in play.
TAKEAWAY: I think about how a trade could move before I enter, including deep pullbacks and how this is normal and likely will make me feel. I remind myself of my longer term goals, and how this 30 pip pullback in the big scale of things has no power over me.
2. RISK AVERSION - previously I've been strong at analysis and mapping markets; but when a trade was coming into a watched zone I would be thinking about too much and hesitate. Deep-down this is likely a defence-mechanism to protect me from potential future pain if I'm wrong (in terms of entering a bad trade, or entering a good trade that still loses). Due to a lack of confidence in my process and indecision relating to which markets are best to trade.
Recently I've been laser-focused just on my watchlist but also tweaking it through the week so not being too fixed on a previous bias. I have been watching other markets but not feeling any major FOMO if they are moving. This isn't part of the plan and something else is always moving without me.
Focusing on defence is always a good thing, but I won't still be here in the long-term if I don't also attack when a good opportunity is there.
As my experience and confidence grows my risk-averse nature has become de-sensitized which means my logical brain takes charge over my impulsive brain. Human brain controls the chimp brain and not vice-versa.
TAKEAWAY: I am here to trade, but only when everything lines up. Even then I only have a 50% chance of the trade working. This is fine. Playing defence is good but I am here to make money and not avoid stressful emotions. I don't need to work on removing the stress, just notice how I am feeling and react to it more productively. After all the basic human stress response at it's simplest is designed for the body to work quicker/better/stronger but usually feels like the opposite.
I am also at peace with the fact that the type of trading I am good at, isn't the same type of trading that makes me feel particularly comfortable. I enjoy short-term trading but appreciate M1 and M5 charts create massive amounts of emotions compared to H1, H4 and D1's. As I have decided to both news trade and swing trade this comes with the territory, and I need to focus on calmness when trading any timeframe.
3. Feeling like I have to be in something/ NEEDING TO MAKE MONEY/needing to put my analysis into use/regret - a salesmen only makes money when he's busy prospecting and constantly dealing. This doesn't translate very well into trading. You have to "pick your customers" a lot more carefully and as the cliche goes...sometimes the best trade is sitting on your hands.
My previous mindset was that I'm wasting opportunities if I don't have at least something in the market. I'm wasting my time and not being productive.
I was always too focused on trades that I could have taken that worked, rather than the likely larger amount of trades that wouldn't have worked but forgotten quickly. I would watch a market running without me calculating after every candle how much money I had "lost" by being a coward. Focusing on the regret element too much and instantly parked in a negative state.
This often meant I jumped in on the next one and inevitably this was a loser (further amplifying the pain).
I was judging the success of my life based on my recent trades...This sounds a little crazy now but at the time it was very real...!
I was loading my aspirations and financial success into little candles on a price chart. This gave them a lot of power over me and created a lot of nervousness and un-happiness.
My mindset now is slightly different. I still feel like I should have trades on to "express my views", but realize this isn't realistic and I'm not a hedge fund.
Markets are generally very random and choppy, I only need to step in when my signals and set-ups appear and my trigger only needs to be something simple.
Anything outside of these parameters is just gambling and I have no edge there. If I sit for 60 hours in a week and break even, this is fine and I think about the positives.
Like Justin says, only focusing on the absolute best opportunities is where I will succeed long term.
Previously I was making some good trades, but also making lots of weaker ones. Hence breaking even for years. The last few weeks haven't been perfect, but my good trades (regardless of win or lose) have dominated.
TAKEAWAY: I need to turn-up rested, prepared and confident but I don't need to act on impulse. I am here simply to follow my signals, and wait for set-ups and triggers. The next few trades dont really matter and have no bearing on my long term success. Groups of 100 trades and my overall discipline are what matters.
I have started a side-gig which has made me feel more useful and productive overall. This has given me some space to develop my trading career at a natural rate of pace, not dictated by me and what I "should be doing and making by now".
There's a lot of sayings in trading such as "hold your winners", "execute your plan", "cut losses short", "master your psychology" etc. They are all basic in nature but to truly address them and execute accordingly we need to truly believe in them. This only comes with putting in lots of dirty work, taking the hits, feeling the stress and pain and yet coming out of the other side still feeling confident and motivated to succeed. I knew about all of these things over 3 years ago, but didn't realize the huge amount of work needed to actually know properly what they meant to me.
I'm grateful and proud of how I have managed some of my previous issues but realize new problems are always being created. I need to view my issues in trading like weeds in the garden, you can clear them out at surface level but the seeds/roots are always still there. They need to be analysed, addressed and managed regularly otherwise they will re-emerge and the process starts again.