Building your own approach to the markets and the decisions
and actions you take are entirely within your own control. But you have no
control over what the markets do. Ideally, you want to react to the market's price movements, and trade within the confines of your carefully constructed framework.In Trading In The Zone, Mark Douglas stated that 95% of a traders'
issues come from the following four fears:
- Fear of being wrong;
- Fear of losing money:
- Fear of missing out; and
- Fear of leaving money on the table.
All of these issues are within your own control, and relate to the compatibility with, and / or your ability to follow your own method or rules.
Several years ago, I was mentoring a trader who kept detailed logs comparing his real results against the theoretical results he should have achieved by executing his entries and exits strictly in accordance with his rules.
He was astonished when he could see the accumulated differences building up over time - and of course, it quickly became clear that his attempts to act 'smart' and override the rules had such a negative effect on his actual results.
I refer to this difference as the 'expectancy gap'.
You can quantify this (as he did) in terms of R. Providing the basic method you are using has a positive expectancy, the closer your actual results get to the theoretical ideal, the more efficient (and profitable) trader you will become.
“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"