Have you ever thought about pulling the plug on your trading operation? I think a lot of folks have, including me. It?s easy to quit but it takes perseverance to ride the storm out and stick with the game. Trading is no different than other endeavors you need a plan, some luck but most of all dedication to hard work and research.
This all sounds good on paper. Imagine some guy telling you how to handle your trading business. It?s easy to read and then dismiss the ideas or you can really take them to heart but the reality is that until you come up with a rock solid approach you may be spinning your wheels
I’ve seen a lot of friends and clients call it quits and 9 times out of 10 it’s all related to drawdowns. People tend to quit after a losing spell. You?ve lost money so let?s just quit and try something different. Are you really cut out to be a trader? Are you really being honest with yourself? Are you asking enough questions? Trading is an easy game to get into but that doesn?t mean you?re ready. There are some things that can prepare you for the test.
As long as you are using a proven methodology then stopping after a drawdown is the worst time to quit as the approach is just going through a losing cycle. You can’t win all the time. I don’t know anyone that has not had losing trades. I’ve met a lot of traders over the years and every time I talk to a successful trader I get the clear picture that their mantra is "Never Quit" and in addition to that I’ve seen first hand what happens. It’s uncanny how often someone will stop trading a certain methodology, whether it’s a system or a set of rules they have come up with, only to see that approach make money right after they have given up.
It’s truly amazing what the human mind can do to sabotage success. What you say when you talk to yourself is really important because this is like a tape recording of what you think of yourself and ultimately what you think your reality should be. I know that it is impossible to control the markets but I also know that I will be successful at what I do – I always have been so. I just tell myself that same thing over and over. You will succeed. Period. There?s no reason to invite indecision into the equation. Sure, I may have a losing trade going right now but I see the next trade as a golden opportunity to have a winner.
Think about how you feel after a losing trade. I don’t like losing trades at all I never have but when I start to see losing trades as part of the process rather than an act against my ego it begins to make more sense. The market is not against you. Although it may feel like it sometimes, this is definitely not the way to think. Losing trades will continue to happen but as long as you use a sound approach and good money management you will prevail in the end.
The Right System
Losing trades and drawdowns are part of the game and the way I see it the cost of participation. You have to take emotion out of this game. Mechanical strategies are one way to relieve yourself of the stress of picking entry and exit points. But, be careful. It takes time to determine what sort of strategy is right for you!
You have to ask yourself a lot of questions in regard to finding what you like to trade and how to trade it. I personally like the stock indices for day trading and that’s it for me. I like the liquidity and the volatility and the frequency of big moves. I like to think of day trading as big move hunting.
This may all sound silly in some ways as you imagine me sneaking around my office in a pith helmet seeking out intraday swing moves in the stock indexes but in reality it’s a serious game that I never plan to quit. If I quit I would not have the opportunity to win. I must admit that this game is harder than ever in my humble opinion. The advent of cheap software and the high concentration of gifted programmers have made the game even more challenging.
But huge moves still happen. I?ve heard people blame the narrow ranges on hedge funds and large institutional traders but the reality is that low volatility comes from a sort of stalemate among all traders and it ultimately boils down to the approach you use. And if you can find an approach that suits you style maybe you’ll hang in there and be a winner.
Just remember, nobody likes a quitter!