When things go wrong

When things go wrong, and don't they all the time in trading?

Why is that?

We can't think in probabilities but expect that 1+1=2 and hope for absolutes or certainties as humans.

Certainty, as one of the six basic human needs, ranks number one for most, and trading does just that, not promise a thing. There is not one morsel of certainty for the next trade, only for a group of trades, and as such, we always feel in limbo and looking for that holy grail, that certainty, every day.

While this urge might never cease, there is a holy grail for trading.: Process.

One needs a process, and when followed, consistent results do mysteriously occur.

Today we examine the process of how to find this ultimate process and how to fix all the flats on the bumpy road to arrive at our desired destination: Abundance.

If trading is 99% psychology, and it is, how can we consistently improve on our shortcomings?

First and foremost, we need to identify when we screw up.

One good way to do so is by getting better at catching ourselves doing things wrong. It is easy to notice if you ran a stop and lost X-amount more dollars than expected. Yet detecting early warning signals before you freeze up or have a deeply engrained unwanted behavior like cashing consistently in too early is trickier.

A good way is a pattern interrupt.

Next time you start feeling overwhelmed, get warm or nervous, or feel any emotion, try to get out of your seat as fast as you can, raise your arms as high as you can, and look up to the ceiling.

Motion creates emotion, and this specific move makes it impossible to be in a negative state but instead makes you smile and be happy.

Now you can sit back down and analyze what might have been the cause for the unwanted emotion. (for some, these emotions might be wanted ones-subconsciously for a gambler, for example, the actual high is to lose it all and to feel bad about oneself to be in the lineup for one self-image of being unworthy and alike)

Once the culprit is identified, there is a simple solution:

A new rule must be brought to life.

As long as a rule is in place, a trader has the opportunity to implement an additional step into his process behavior chain, and in doing so, he/she is safe.

This process, in turn, builds self-confidence, and a few steps further down the line, the proper execution line is ensured.

Should the unwanted behavior feel confusing, it is most likely a conglomerate of more than just one culprit, and it is, in general, sound advice to dissect a more complex situation and junk it down into smaller pieces to make it emotionally manageable and each individual component need further examinations and explorations and multiple rules will be required.

In short, traders look for causes and remedy them with rules.

Now it isn't as simple as "keep your runners short and let your winners run."

One can't overcome a deep-rooted survival instinct of getting hopeful in adversity and being risk averse in life by taking consistently small profits. Still, as the quad exit proves, a set of rules that are a bit more sophisticated are again the solution (in this case, we honor through fiancing the need for instant rewards and open the field for further out profits emotionally manageable now that we have made ourselves an instant winner at an early stage to perceive markets accurately in their next leg and all the while keeping risk extremely low, which makes stops more manageable and avoid non-principle based behavior of trailing stops too early.

Besides a rule implementation, there is a second way to have a lot better chances to improve as a trader: risk reduction.

Most traders trade too large and, as such, stumble into an array of emotional problems.

It is essential to trade size always accordingly to one's accepted risk appetite.

Most traders can't start out trading leveraged futures and alike where even very few ticks already create loss risk that the novice can't accept. Especially when they typically already have a history of consistent losses and wiped-out accounts that have lowered the risk appetite significantly(at some point, enough is just enough to endure pain).

In case the obstacle isn't a behavior that can be caught in the act like unwanted thoughts or execution hesitancy, a third method very useful is asking quality questions.

It helps to use the following format:

"If I knew what I did wrong, what would it be?"

"If I knew what I need to know, what would it be?"

Should the answer elude you, ask yourself that question before you go to bed again with all sincerity, and you might find the answer ready on your lips in the morning.

One word of advice. Much of the work of a trader's path is pealing one's onion. We are ready when we are ready, meaning some of the skeletons in our closets are easier to be liberated, and some can be very significant old wounds from childhood that aren't as easy to be dragged into the sunlight.

In other words, all this work needs care and all the time necessary to bring light to the shadows in their time. These processes can't be forced by any means. For many professional help is an absolute must. If simple methods like those mentioned above do not open the gate to a solution process, do not pry that gate open since that could be truly harmful to your being.

All in good time...