Controlling the highs and lows

[rags2riches]

I understand the need to moderate the emotional response from having a good day and a bad day, which left unchecked will quickly destroy a trading account.

Are there any specific methods people employ to moderate the highs and lows?

I am finding slow breathing very helpful during a trade in remaining calm and objective.

Thanks in advance.

 

[BSD]

I've found the best thing thing is to not get overly upset about losing trades or bad days by seeing them as all they are, no more than a cost of doing business as a trader.

Of course, by equal measure that also means not getting unduly euphoric about great trades / super days.

Letting your current short term P/L drive your emotions, moods and general well-being or despondency for the day is imo just a fast track to an eventual guaranteed burnout or heart attack.

Focusing instead on your long term objectives allows you to see individual trades or days with the detachment they deserve, lets you see them as all they are, tiny stepping stones that on their own are almost totally irrelevant, that only gain real significance when seen from a truly long term perspective as an endless succession of elements driving you to higher highs and higher lows on your road to success.

 

[Hoggums]

I think if you are needing to employ breathing exercises when you have a trade open you are trading too large a size. You should decide before the trade how much you are willing to lose on it - and adjust the size accordingly. Then it's no fuss - if it stops out then you've already gone through the mental exercise of accepting the loss.+

Win/lose - on an individual trades it shouldn't matter too much - it's all about average rate of return.

 

[jiggly]

1) go into every trade expecting it to be a loser, your job is to reduce the loss.

2) have a clear set of rules and follow them like a machine, if you cant and your rules are simple enough, try to get your trading activity automated to remove the emotional attachment. this could ultimately be ruining your performance if you dont trust what you are doing or what you should be doing and when.

3) increase your position as the market moves in your favour and continually do this for as long as it proves you correct (refer to point 1.), just know when to stop doing this and start with only a portion of the intended trade amount. This way you can assume that your minimising your losses and maximising your profits. I have recently found this to be very usefull as I can increase the amount of capital which is exposed to the market without increasing financial risk. thus netting me more profit when the market proves me right and losing less when the market decides it wants some of my capital back.

simply by implementing a strategy to add to your position can turn a system with a low win vs lose ratio into one which performs with a higher ratio, assuming the risk vs reward for the two systems are constant.

4) remind yourself you dont know everything in advance and you can only react to the market action.

if your getting emotional about a trade, its probably because you are trading too much, risking too much or have yet to accept that the future is uncertain, or combinations of these.

 

[fibonelli]

The other issue to consider is the relationship between win rate and average profit/average loss per trade.

A method could have a low win rate but is compensated by *high profitability on the winning trades or the opposite.

Not everyone can cope with a low win rate.

*very strict risk management required.

 

[littlemog]

indeed. a low win rate can kill the emotional stability of most people before that next win. and in their state, they'll probably kill the win before it matures.