On the right psychological mindset:
For a lot of traders, it doesn’t matter so much whether their first big trade is successful or not, but whether their first big profit is on the long or short side. Those people tend to be perennial bulls or bears, and that is very bad. Both sides have to be equally OK. There can’t be anything psychologically more satisfying about one than the other. If there is, your trading is going to go askew.
On taking losses:
Since then, I have learned that when you have a destabilizing loss, get out, go home, take a nap, do something, but put a little time between that and your next decision. When you are getting beat to death, get your head out of the mixer. Looking back, I realized that if I had had a trading rule about losses, I wouldn’t have had that traumatic experience.
You mentioned that before you developed a mechanical trading system, you paid close attention to the trading process. Did you keep a log of what you did right and wrong, or was it a matter of memory?
Yes, I would write down observations and think about them. I thought about everything I was doing.