Shooting weighted dice on the street

My first three years in trading

• Observing probabilities

  After learning various market setups and situations, I've come to see them as a set of probabilities, or probable outcomes. The market does all possible continuations over the long arc of history of any particular setup, and at this point in time, I happen to be trading one of those outcomes. If a trade works in my favor, I recognize that it could have gone the other direction. I'm never right, per se, but (hopefully) favored over time by the probabilities. Which is to say I've studied the markets enough to have an inkling of the probabilities. I'm shooting weighted dice.

• Beyond the money

  Why want for money when basic needs are met? If trading in a simulator, why does it still hurt when wrong? Why is there stress when nothing is on the line? When you do not know the answers to these questions, fear will be your companion. A loss can mean you feel worth-less.

  If you go beyond the money as a measure of your worth, a loss can mean a mistake was made, or be normal part of your operations. A win can hide a mistake or be part of normal operations.

• Learn how to be a loser

  Most egos don't want to lose often, be wrong and feel like their status has been lowered (e.g. have less money than before). Being right or wrong, richer or poorer doesn't change your worthiness, but if you think it does, it'll make it harder to trade. You're not your bank balance, your daily PnL or your social standing...

• Trading behavior as performance

  When going beyond the money and learning how to lose, a new measure can emerge. The measurement of trading behavior. Instead of looking at daily, weekly or monthly PnL, consider what happened when at the limits of the trading or risk management plan. Was execution of the actions in line with the plan or not? If it was, it was successful, if not, there is more training to do. Let trading behavior be the measure of success or failure. Let each approach of the limits be a learning oportunity to see how you hold up. While many aren't cut out for short term trading, they don't have an edge, they don't have to lose due to reckless decisions. Let trading behavior be the measure of success and results will be inline with expected returns from the predefined risk management and trading plan.

• Making trading easy

  If trading seems like a chore and not enjoyable, then it's best to stop. Either temporarily to suss out what's not working or entirely. Some mistakes that can make trading less enjoyable are:
  1. Always feeling like it's not enough and wanting more. When the wanting becomes greater than the capacity to withstand what comes with it, like increased risks, then you'll not enjoy the frightening swings.
  1.a. Increasing risk to quickly can lead to losing the entirety of the gains that were made in a short period of time. This happens when trading for an outcome, rather than the joy of trading.
  2. Not accepting that there will be losses and that it is okay to lose. When losses become unnacceptable, there is a tendency to chase after the loss with more trades that can lead to a downward spiral. These kinds of tailspins are not enjoyable nor necessary.
  

• Perfectionism as a performance deterent

  We normally think of perfectionism as a good thing, but in trading it can be a deterent to performance. Perfectionism can lead to punishing oneself for both mistakes and successes. Afterall, one might be tempted to think a successful trade could have been more successful with larger size or a different entry/exit. This kind of thinking can lead to a never ending cycle of negative self talk so that when you lose you feel negative emotion, and when you win you do too.

Tags: trading