Saturday, September 13, 2014

A trading confession

Well, this week has been an interesting one. Two issues reared their head:

1. I made a trading mistake;
2. I confronted a bias in my mindset which has affected my recent trading.

The trading mistake was a basic one, and the required change has already been put in place to ensure it doesn't happen again. Thankfully the tuition fee of -0.51R was relatively cheap.

The recognition of the second issue was sparked by a comment by one of the members in the mentoring group.

Mindset or bias issues can afflict traders who are not totally automated or systematic, but fall into the 'rules based discretionary' camp. If unchecked, they can build up in a traders' mindset over time and ultimately impede performance. The difficulty is in being able to identify them. Reviewing your own performance can help you. In this particular instance, as we work together in a small group, someone else's comment was the trigger.

Going forward, the next issue will be to ensure that I do not over-react to the bias issue, and end up going too far in the opposite direction. I already have rules within my overall trading plan that will help me avoid this.

This is all part of an ongoing education.You are always a student of both the markets and of yourself, and that is what makes this business so great. No one is immune from mistakes or mindset issues from time to time. No matter how well you do, you can always do better. Go through Market Wizards and in most of the interviews you can see how even these great traders talk about making mistakes (sometimes huge ones!), whether they be either operational, predictive, emotional or just plain irrational.

This is also why you can get huge discrepancies between theoretical and actual performance achieved. It is a constant process to work out how you can close the gap between the two, and being able to implement the necessary changes you've identified. More often than not, it will come down to issues caused by the trader, their mindset and the resultant or consequential actions they have taken.

The big differences between successful traders and the majority is they will acknowledge they screwed up, and endeavour to avoid making the same mistakes in the future. In other words, they take responsibility for their actions, do not blame others, and take the necessary steps to improve their performance.


  1. Steve,

    What were the actual mistakes? trading & mindset? You don't talk about either one.

    1. 1. I have a rule to cancel unopened orders at the end of each day, and if necessary, put the order back in the system after the open the next day. This was violated.

      2. Due to a combination of a run of losing trades, the general market indecision (particularly here in the UK), and my observations in other traders about overtrading when conditions are not favourable, I was being too conservative or cautious in opening new positions.

      The point of the post was that, no matter who you are, you are not immune from mistakes or issues coming up. You need to accept them, make any necessary changes, and move on.

      Hope that helps.