I got an email Saturday about “Hey, you know, I find myself forcing trades in these markets.” And I said, wow, that’s great insight on your behavior. When the markets are the way they are, which are super tough, you know, for long, only traders, you can find yourself especially if you are a discretionary chart reader coming to the market, every place doing your due diligence, you know, scaring the world for however, you’re finding your names and then feeling as if as every day comes, you actually have to put on a trade. And I think the big difference between pros and the amateur market is the pros only trade. When they have an absolute edge that they can affect onto the marketplace. Then if they have to, they sit on their hands and let the day go by.
Why do they do that? Well, each day is only like one little speck of sand over at west end two or in Santa Monica bay, the big beach, right? So it’s not that big of a deal. If you sit on your hands for a day, the last thing you want to do is put good money after bad. You see? And so it also helps you keep a good frame of mind because if the market is not amenable to your trading style or vice versa, you’re not forcing things just like in life. I mean, as soon as you start forcing something, you almost know intuitively that it’s not going to work. It’s true in relationships. It’s true in jobs. It’s true in a lot of spots. So why people try to force trades is kind of, I mean, I kind of understand that you feel like the fear of missing out.
There’s gotta be opportunities somewhere. You see this when people downtime into intra day charts, right? When there’s nothing happening on the weekly’s or the dailies or worse they’re in down trends, some brain surgeon out there is going to start looking at intra day charts to find the UPT trend. This is a fool’s errand, so don’t do it, but it does make a lot of sense to run your screens. And if you don’t see anything, turn off the computer, go find something else to do and come back tomorrow, start over. You don’t want to have to feel as if you have to trade every day. I don’t know where it started, probably through all the marketing that’s done to the folks who want a day trade even short term traders, don’t have to put on trades every day. It’s not good for your psyche. It’s not good for your overall well mental wellbeing. And it’s certainly not good for your P and L. So if you find yourself feeling like I need to put a trade on,
Take a look at that and say, where’s that coming from? Whoever made that rule, right? It’s probably the same person who said you can’t possibly take home an E mini contract overnight, right? It’s stupidity who would ever say that makes no sense whatsoever. There’s no generalizations that fit for everybody on planet earth. Now that’s a lot different than having a signal or a trade, and then not putting on that trade and then missing the trade. That’s a different story, right? That’s when something is absolutely clear and abundant, and then you don’t take the action that you should, but the action is only when the setup is there or when your model, if you’re purely systematic fires, a trade, I know purely systematic guys right now who are still in a draw down. So the advice there is to cut your position size take a big haircut.
Meaning if you’re down from a hundred percent, say you’re down 10% so that you have not what I call 90 cent dollars from what you used to have at the highs, cut your equity down to 60, 40, 50, 60% and make your risk units based on a smaller portion of your capital. This way you can still be true to your system. You can still take every trade, but as long as the market, isn’t showing you any love, you’re not taking these bigger risk unit losses sooner or later, it’ll turn like it always does. At which point you can find evidence to increase your position size again. When would that be? I don’t know, one or two months of positive P & L maybe 6 out of 10 winners winning trades. That’s really very subjective. So it’s hard to tell without knowing a person’s particular set of rules, but it’s food for thought.
That’s the main thing here. You have to figure this out yourself. Anyway. Thanks for being here. Please consider subscribing. I’m getting some really good data and the more people who subscribe, I get a much more pluralistic look at what’s going on in the environment and what you like, what resonates with you. And that’s important, because I don’t want to waste my time and I don’t want to waste yours. If you haven’t already gotten a copy of the audiobook version of the inner voice of trading, you can get it for free at Martin Chronicle.
Click here to get your free copy of The Inner Voice of Trading audiobook.