What has been frustrating on this journey is that as time progressed I couldn't understand why I was not profitable, yet I knew that I had been acquiring and was continuing to acquire vast amounts of knowledge. I was about two years into trading when I demanded of myself to sort this out. I was doing all of the following:
reading endless amounts of trading books - technical and emotional
engaging in a high volume of trades
watching different you tube trading channels (that's a different article)
reading articles on the web
analysing past trades
creating and trying to follow strategies and refining
journaling my results and actually looking back at them
With all this investment over two years, what more is required in becoming a profitable trader? I realised that if I looked at my results, my run rate on losses was not getting any worse and actually the data was telling me that I was now a break even trader over the last few months when I performed this review. This was improvement. I just didn't give myself the credit that I had gone from loss making to break even. The wider issue here was expectations. Who wants to be a break even trader? It is part of the journey, but justify that to yourself when you are putting in a lot of effort in and not seeing any rewards for it, from a monetary perspective at least.
Forgive the simplicity of my chart above but effectively you have to wait until the knowledge that you have been acquiring sinks in and gets implemented. I am seasoned enough in life to accept that there are no get rich quick schemes and to be successful at trading, you first have to lose, and lose a lot! I probably had unrealistic expectations thinking that it would take only one year to become profitable. Anyone who reads this article knows, trading is extremely difficult and takes a lot more time than we expect.
As I moved into being a break even trader I invested time understanding my results from an analytical perspective. The reason I was not making money to show for all the efforts was basically because I wasn't making enough profits on my winning trades. Yes my win rate wasn't great but I knew I was not delivering the profits that I should have for a number of the historic trades.
Previously, whenever a trade was profitable my ego took over and I felt fear that my profits would be taken from me so I used to engage in behaviour that resulted in much lower wins; moving stop loss and getting whipped out of the trade or just exiting early. I said to myself, if you are actually aspiring to be a full time trader you are going to have to learn to let the winners run, while they still have juice in them. Stop being so fearful! If I don't, then I am to expect to be a loss making trader and be in the 90% losers club, a place I deserved to be. Being truthful to yourself is hard, naturally we don't like to be honest with ourselves if it causes pain or damage to our ego.
My main aim from this point was at least to give myself the chance to increase average profit per trade. Upon exercising this particular trading demon I have managed over the last six months to become profitable. Believe it or not, despite being in the green now, my win / loss ratio is actually worse! It's bizarre, but I became a victim of my own success. By being conscious of my own emotions ie the fear and forcing myself to not move stop losses or exit trades I was actually making strong profits on the winning trades I had.
Now is where being a victim of being successful comes in. This success was giving me a sense of over confidence and this fed my ego, resulting in less discipline over these last few months. I have been entering too many poor quality trades or trades that aren't part of my strategies. I have been realising a much lower win / loss percentage. Thankfully, my risk management is strong and I am disciplined, in the majority of my trades, to not risk more than the amount that my rules tell me I am allowed to. Amazing that I am now clearly winning overall but I am giving money back to the market even more than before.
On this constant journey towards mastery, cutting out these needless off plan trades is going to be fundamentally important if I am to be successful the way I want to be. Forget money and other aspirations I just want to be able to learn to respect my own rules.
Cutting out demons is hard and we have to find consequences for ourselves, something I wrote about in a separate post called Consequences for not following your trading rules. My next step I have decided is to share publicly my trading account balance, along with the results of each and every trade that I take, so that the balance is reconciled. I don't keep a sizeable balance in my trading account because I can utilise leverage but I believe this will help keep me accountable to myself and address my new demon of reckless entering of trades because I think I am better than I am or I know the market better than I actually do.
So going forward the funds balance will be reconciled with the winning or losing trades which will be posted. Ignore the win rate highlighted above because the way my platform works, if you take profits along the way it recognises that as a separate win and therefore that win rate disclosed is flattering and higher than the win rate under my own calculations. The unrealised loss is my open 4 hour time frame oil trade (for now anyway) from the 25 April that is still open.
I have made many improvements over the last 6 months to become profitable on an overall basis, a very difficult journey. I do see the fruits of my labour. This labour has been the amount of time I have invested in the continuous technical development, analysis of my performance and self reflection into my emotional state and a few of the things that I mentioned at the beginning of this post.
This whole trading game is all about understanding yourself and being honest with yourself. We have to work on one aspect of our trading at a time if we are to achieve the outcome we desire. Are you grown up enough to accept to first look for what you are not good at and then step two, which is even harder, follow through with actions required?
My next step is to rigorously work on my win / loss ratio by forcing myself to restrict trade entries to trades that fall within my rules. I believe that reliving the pain of these ridiculous trades by being forced to write them all out and shaming myself should help me reduce my losing trades and improve my win / loss ratio. Wish me luck!
Looking forward to post about my progress as I am going along and feel free to share your own experiences. The result here, whether winning or losing is to lose well. If I get a string of losers but they were trades I should have taken, this will make me happy. It would mean I have made progress.
Trade Clearly!
Comments