Archives of “self sabotage” tag

rss

How to recognise self sabotage in your trading

  
  Education
#  #  #  #  #  #  #  #  #  #

Self-sabotage occurs in trading in many instances:

1) When you know you should follow the ten tasks of trading, but you don’t.
2) When you know you need to determine if your system will really work, but you just trade it anyway.
3) When you know you should develop a business plan for your trading, but somehow that just seems like too much work.
4) When you know you need to put a stop loss order in on a trade, but you don’t.

Hmm, guilty as charged. 

I have yet to hear anyone say, “I don’t make money picking stocks – I make money by cutting my losses short and letting my profits run. And more importantly, I meet my investment objectives through the judicious use of position sizing.”So, less focus on the system – more focus on self and self discipline.

Good Habits

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

When a new trader comes to me for advice, quite often they have suffered initial losses from their trading activities (sometimes heavy ones) and have not really had a focussed overall trading plan set out, or if they have, they’ve not followed it.

Even if you start trading with limited capital, it is important that you start ingraining good habits as early as you can. Principal amongst these is ensuring that you do not trade too large positions relative to your overall equity. 

Depending on your chosen method of trading, transaction costs can also eat into a small account, and the trading vehicle you choose to use should be carefully considered.

However, it is a well known maxim that the vast majority of new traders blow up their accounts within 6 months. This is not necessarily as a result of their method of choosing their entries and exits (although that undoubtedly helps) but more as a result of risking way too much on each trade, or in extreme cases having a complete disregard for risk.

Trading is a marathon not a sprint, and to stay in the game you need to exhibit strong risk control right from the off. The sooner you can ingrain that in your method and your mind, the better. Even the best did not necessarily get a grip on risk control early in their careers – in Market Wizards Paul Tudor Jones talks about losing 70% of his equity on a single trade relatively early in his career. It was only after that experience did he go away and implement rigorous risk control.

From having risk under control, unemotional trading decisions can be taken, improving your mindset and allowing you to follow your system with no risk of self-sabotage. Allied to a proven method for selecting entry and exit points, you will be well on the journey to trading success.

Monitor yourself

  
  Education
#  #  #  #

I define a mistake as not following your rules. Thus, for many people who have no written rules, everything they do is a mistake. But if you have followed the first four steps, then you will have rules to guide your trading and you can define a mistake as not following those rules. And, of course, when you repeat the same mistake over and over again, then that is self sabotage. However, by monitoring your mistakes and continuing to work on yourself, you can minimize the impact of such mistakes. People who do this, in my opinion, will tend to produce consistent, above average profits

Go to top