We hear this a lot. Every day.
"I know how to trade really well, if only I could trade less."
Of course they catch the big winners, they are taking every trade. But guess what, the losses are killing them.
One day away
Regardless of their progress, all of these traders are one day away from blowing an entire account.
Why? Because they are either:
- Willing to take massive drawdown
- Lack enough planning to know when NOT to trade (yes, you're overtrading).
Focusing on the tools and your charts is avoiding your real problems:
- Well-executed risk management
- Your relationship with money
- Doing the work of creating an action plan you really follow
"Maybe it IS about the risk management?"
Doing the hard work isn't fun, you will avoid it and drift back to new strategies.
The work doesn't give you the rush like a green trade. But nothing feels as good as being net positive month-over-month.
Walking off path isn't just slowing you down, it's moving you backwards.
- Every day you have poor risk control, you deepen your bad habit.
- Every day you take random trades, you are strengthening your inner gambler.
Each one of those days takes you further away.
You are going to have to spend just as much time to walk back all those bad habit days before you even start to succeed.
That endorphin rush from going green one day feels good, but you always give it back in time -- are you seeing the cycle? the casino is winning.
Take as long as you need.
But you can't skip the risk management. There is no other way.
Okay okay. So what can I do?
- Calculate your max daily risk so you’d need at least 10 losing days in a row to blow up an account.
- Never, ever, ever break your max daily loss rule. Ever. Full. Stop.
- Reduce your contract size as far as you need so you can actually follow your rules this time.
- Yes, read some psychology books. But stop over-consuming and start doing (not just planning).
- Journal how you feel and what you see; before, during, and after your trading. Keeping that stuff in your head isn't having an impact. Write it down and make it real.
- Have a trading buddy or coach. Someone who holds you responsible without judgement, only constructive criticism.
- Build your confidence and plan your levels yourself. Take trades based on those levels and watch them work. You need trust in yourself or you'll be prone to seeing "opportunities" all over the place.