Just received an email from ‘Little John’ of www.forextraderoom.co.uk titled, ”Do trading losses effect you mentally?” Little John who’s ex partner ‘Robin Hood’ left his merry trading education business over a year ago, has now set up his own group of merry traders. His email sparked an idea in my mind for an article myself. After all the biggest problem in any form of trading or other risk taking venture is losing and especially the losing run where confidence is seriously eroded. I’ve not tried any of Little John’s or Robin Hoods services but often heard good reports by the way.
Lets get to the bit about confidence which obviously builds up after a series of winning trades (could be a case of fooled by randomness), but only really kicks in after seeing consistent returns over a series of many trades. We need absolute confidence that we have an edge and also in our ability to trade it, to be able to hold our nerve and stay in control, so we don’t reach a tipping point of despair and frustration, then start breaking rules, overtrading, dreaming, gambling, hoping. So how do we get there? We all have heard about discipline, patience and control, but it’s not that easy to achieve.
Now I want you to read this short extract from the very excellent gambling book ‘Winning Without Thinking’, by Nick Mordin. Chapter 10. are you trying to please your mother?www.amazon.co.uk/Winning-without-Thinking-Definitive-Betting/dp/1904328008?ie=UTF8&keywords=winning%20without%20thinking&qid=1460380204&ref_=sr_1_2&sr=8-2
Similar problem, different game. Just because we call ourselves traders, doesn’t mean that we aren’t gamblers. It’s just another form of risk taking. We just need an edge to play.
Now for another professional gambler taken straight from the works of behavioural psychologist Dr Howard Sartin
www.sartinmethodology.com/pubs/PsychologyOfWinningPMTR.pdf read this short extract.
Similar stuff we read about in trading books, yes?
Now Sartin had a pretty maverick way of treating compulsive gamblers. Commissioned by the State of California to work in a therapeutic setting with 36 truck drivers convicted of gambling related felonies or misdemeanors, he decided on an alternative to the usual, ”Sit in a circle and admit you have a problem,” type therapy. Instead he came to the conclusion that none of the 36 were either truly compulsive or pathological and that they were just all losers at gambling and life itself. Only their personal low at being convicted, had caused them to seek help to change, otherwise it was off for a two way stretch in jail.
” They were losers, pure and simple. My thesis was – and is: the cure for losing is winning!
So began his study of losers for which he came up with an alternative Three R’s, as a way of re-education. Reality, Responsibility and Record Keeping.
Reality means exploring the myths that dominate ”horseplayer” thinking, such as fixed races, jockeys who stiff your horse on purpose, the undue influence of trainers, track maintenance designed to prevent the front ”speed” horse from winning, or the opposite etc, etc. ”Such Myths flourish because most human egos are so fragile that they will not accept the notion, that the outcome of any event is not controllable by man. When all other rationalisations fail, the loser will lay the blame at heaven’s doorstep. Losers refuse to accept the reality that the horse runs the race and that accurate recognition of running patterns, class and conditions, produce the winning horse in the vast majority of races.”
Responsibility he emphasised that you are alone responsible for your selection and wagering decisions. After every race, how often do you hear those mournful cries of, ”I knew that horse was going to win!” I woulda, coulda, shoulda. Never taking responsibility for self.
Record Keeping. In serving thousands of horseplayers it was found that very few kept any written records of their selections or wagers. It was found that all consistent winners maintained copious notes.
Ok well more stuff on a parallel with trading. The point is that after working with his criminal patients on how to win more often, most of them actually did learn to win, even if only on a very small scale. Of course the square heads in charge of his appointment by the State of California, on discovering his controversial non-politically correct methods, soon cut short his contract.
Now for me this is the interesting bit about his Win Therapy. Part of the method of wagering was that they had to select more that one horse in a race. The reason was when you bet on more than one horse you dramatically increase the odds of a successful wager. It is the losing run that most greatly effects the losers mental strength. In trading a way to increase your win ratio would be to reduce your take profit and increase your stop loss, exactly the opposite of the ”let your winners run and cut off your losers short” message we are always told. An interesting advocate of this sort of play is Boris Schlosberg. Here’s an extract from a post last year titled. ”How Yogi Berra taught me to win 95%of the time.”
Here’s the full article www.forexlive.com/!/how-yogi-berra-taught-me-to-win-95-of-the-time-00-20150926
Another trader I follow who boasts a 93% win rate is Allen Bary at www.wallstreet2easystreet.com/ He trades a scalping method with a stop of about 10 pips and targets at 3 ,6 and 9. He trades within the volatility range on the tick chart he uses, in the direction of pressure, between points on the chart of near term support and resistance, where likely supply and demand is found. He uses Time and Sales and Bob Volman type entry set ups and is very consistent.
Another thing to do with the effects of losing is to cut the risk % on each trade, it is what Rob Booker keeps banging on about for survival in this game. thebookerreport.com
Shonn Campbell at www.fxinventorytrading.com is a prime example of a trader who trades tiny, then adds to the trade within certain limits of chart structure if it goes against him building a position. I don’t know what his targets and stops are like but this method means he is likely to hit out with the occasional big loss but many more good trades.
One of my favourite blogs to follow is that of robot trader Scott Welsh tfl365.com/scott/ He often uses his trading results for analysis to make improvements to his systems and I once heard him stand up at a trader conference and say, ”it doesn’t matter if your targets are less than your stops, in fact often it is the better bet.” Here is the link to the conferences if you haven’t seen it before You can watch the recent Rob Booker live seminars here . I have put it up before and you will have to wade through to find Scott’s contribution.
Losing runs are the bane of the risk taker and just to show in numbers, what we’re up against, here’s a link to an interesting losing streak calculator www.sportsbookreview.com/betting-tools/streak-calculator/
I’m off now for some Ale in ”The Peacock”and a Friar Tuck Chip Butty from the chippy on’t corner. Here’s the Peacock.
And for those of you interested I’ll finish with the email from Little John.
Hi Everyone Just thought Id write an email after last weeks trading to see if people can cope and manage their losing trades correctly. Do you have a set risk reward setup, calculate your trades correctly so you not always just entering at 0.1, 0.5 or 1.0 or whatever size you trade. Do you calculate the size of your account and work out what lot size you should be trading based on your stop loss, risk amount and account balance. If your not then you really should be. People ask for a win/loss ratio on trades and this really does not matter or have any influence on how much money/percentage return you make each month and year. You can actually lose almost 60% of your trades and still make an excellent return each and every month. So I just want to remind all you traders, make sure you have a plan and stick to it DO NOT deviate from this. Working this way means as you have a few losing trades your risking a % of your lower account balance each time, and as the winners come and the account grows your risking a % of the larger account and this is what allows it to grow. So stop thinking about how many losing trades you have, simply make sure that your risk reward is correct and if you can get anything above 50/50 then you will guarantee to make money and a good living if you can do this consistently. Next I want to look over a couple of charts that you may want to look at yourselves and also show the kind of thing we look at every time in our webinars to plan our next few trades in the week ahead. Also dont just enter a trade because price has hit a certain area, get some confirmation of price action 1st, this will save you entering and guessing of just anticipation, this is not trading but simply gambling if no predetermined risk. EUR/USD http://clip2net.com/s/3wJvUc1 weekly view AUD/USD http://clip2net.com/s/3wJxgvT daily view GBP/USD http://clip2net.com/s/3wJzf7p daily view GBP/AUD http://clip2net.com/s/3wJBe2e daily view Do you look this deeply into your trades before entering them? Do you then calculate your risk reward ratio? Then calculate what size you should be trading on your account size and what risk you should risk on each trade? If you are not doing these things then your going to get swallowed up in the forex world and find it very tough to make money trading these highly volatile markets. If this is something you would be interested in, not going for 20-30 or 40% a month, but trading exactly how money managers and funds trade looking for great reward trades and making 4-10% a month (10% on good months – not often) so achieving apprx 50-60% a year entering trades 10-15 minutes a day then we can offer that here at www.forextraderoom.co.uk Wish you all a Happy Trading week and should you have any questions please email or skype me with the details below :- skype – chrish9070 email – firstname.lastname@example.org or email@example.com Regards Little John
and Regards from fxoutlier also.