stevequal wrote:As you say its a very logical argument.
Most traders learning the business actually follow the same path from relative ignorance to a fully professional approach to trading but going over that same path, in the same direction repeatedly, rarely turns a part time trader into a professional. Perhaps it is time to take a unique view of your experience and reverse the thinking process.
Why do traders get frustrated/angry/envious when they do something that causes them to lose large sums or even their whole bank? It is usually because they realise that a weakness in them or in their methods is what is to blame. So, why did you lose so much money? The usual reason is that you were trying to recover a
smaller loss and irrationally decided that placing a bet (or lay) or going in-running would enable you to recover that loss; and sometimes it does but more often than not, and certainly in Steves case, the losses accrued attempting to save smaller losses usually account for a huge proportion of overall losses suffered by employing such recovery methods.
The problem here is that "something" has gone wrong with your fundamental controls to make you suffer the
smaller loss and psychologically you need to wipe out the memory of that error by recovering the loss, to make things "right". Why does this
"smaller loss" matter? Simply because it is an
"unacceptable smaller loss" . Every trader needs a failsafe device/method that prevents him from exceeding an "acceptable" loss and every trader needs to learn how to "accept" an acceptable loss. Peter has alluded to using automation (or Excel) to prevent the temptation of going in-running/gambling but it is like locking the stable door after the horse has bolted. Of course the suggestion has merit and in the absence of being able to properly address the real issue, it can be a useful tool in the learning process.
Have you clearly defined what you regard as acceptable profit and loss amounts within your method of trading? All professional traders realise and accept that whilst they enjoy positive P/L's that their path to success is littered with losses, all of which are inevitable. Losses are the other side of the risk/reward equation and defining what level of loss within the methodology is absolutely essential to good trading. Is your expectation realistic? Steve admits that his expectations
are not insofar that he needs to use larger stakes to make the process seem real to him. Stake/profits/losses are part of the same equation, an equation that is finely balanced and designed to produce an overall profitable P/L that is both sustainable and predictably boring. I say boring because, as Peter says, until you understand that trading is not the quick way to riches and Pro traders bread and butter is the ability to add together a succession of £1 profits, then you will fail to make trading pay. Is the trader disciplined enough to carry out the trading methodology? A single lapse is all that is needed to turn a winning day into a loser and however rigid a trading process is defined, there will always be an unexpected event that catches out even the most robotic of traders.
Still working backwards from that loss of bank, the methodology a trader chooses to use has to be clearly defined and easily executed. He has to prove the method makes money and also prove that the method does not suffer "unacceptable" losses. Every loss that a system makes can be annoying/upsetting but it would be a foolish trader that employs a methodology that throws up losses that are not part and parcel of the trading plan. If your method of trading is unstable, assuming you can not cope with instability, then it is time to re-examine whether or not it is the right method for you.
Every method of trading has to contain an edge and in order to exploit that edge the method has to define stakes/gains/losses in sufficient detail that the whole process of trading becomes boring in its execution and doesn't contain any surprises such as an "unacceptable" loss. Failure to sufficiently define a trading method in enough detail will lead eventually to a loss of your bank.
