The trading demon that mints money

I would like to share the portion of my trading plan that made the difference for me.

There are many different "trading demons." One in particular has bedeviled me since I started trading. That demon I call, "the need to know more."

This demon mints money for the sellers of systems. This is how it works.

There is no "Grail." Fear and Greed demand of us that we search for it anyway. Losing is painful on two levels. The immediate level and the future level, because we think as losing traders that this individual loss threatens our future success.

It was the defeat of this demon that made the difference for me.

more later,

Archie

Hmmm... knowledge is power. It depends on what sort of knowledge you have. If your knowledge is inconsistent with reality then you will "need to know more". I fail to see how buying a trading system equates to knowing more, or attempting to do so. If someone decided he didn't need to know more, he may continue in his false or incomplete beliefs forever.
imho

When I first started this journey that trading became, I realized that I needed to learn. I started with books, and there are many excellent books. I purchased a few systems. I subscribed to a newsletter. I had my first big win. I made over $40k in a trade on RMBS, a tip from the newsletter. I was hooked. I had little idea what I was doing but I was starting to experience fear and greed. The dream of trading success was becoming real. I bought a refining stock. it was a great buy at $25, down from $60. It went to $5. I was down about $30k. I averaged down all the way down, without a real plan. I got out around my breakeven at $15. The refiner went to $25. I realized that I didn't know what I was doing.

I went to a seminar, I saw myself as a bystander, interested not only in the seminar but in the attendees. Do ANY of these people make money in the market? I spoke to many, most seemed to have little more experience than I did. I had a suspicion that many made a pastime of attending seminars. They enjoyed attending seminars because the seminar helped to flesh out "the dream."

This is the "need to know more." It is also known as fear of trading or failure to pull the trigger. I don't truly know that this problem affected the people I met at the seminar but it affected me. I may have projected my struggle onto them but I have enough experience now to know that "the need to know more," drives the trading information industry. An industry that sells untold and unknown amounts of product to individuals, most of whom will never successfully trade.

Let me explain a little more fully how this demon affected me. I heard early on that I needed a plan, that trading is a business. Yet I continued to trade, live, without preparing a plan. I argued that I was investing and that I didn't yet know enough to write out a plan. I lost $25k on some call calendar spreads that I held through a bear market. I held them, the long calls, to expiration, to zero! Everytime I had a loser, I would buy a new book or sign up for a new newsletter. I needed to pump up the dream. It was childish, but feeding the dream with the hope I received from this learning felt good. Losing brought pain and while losing capital brought pain, the damage to "the dream," was worse. With every loss the dream would die a little more. It got to the point where I would spend 90% of my working time studying and 10% trading and the trading became very small lot or demo. I was stuck in this mode for over a year. I actually was net positive for my entire trading career but crippled by disorganization. I had discovered systems that truly worked but abandoned them after a string of losses that brought pain that I wasn't ready to accept.

I did find my way out of this mess. It was not instantaneous. But there were a couple of key events that changed it for me. I still have slip ups but I now have a plan, I have improved my organizational skills, I have developed a method, plan, system that works for me and addresses my weaknesses.

More later on the key events...

Archie

Interesting.... please continue

When I titled this thread, "the trading demon that mints money," I did so with the intent that we think of money minted for the training/system marketers, as well as for ourselves if we successfuly overcome this demon.

But on with the story. About a year and a half ago, I attended a seminar on trading plan development. The most important thing I learned was the value of a trading journal. The most important part of the trading journal is the part that deals with demon tracking.

Everytime I trade, since I now have a plan, I can chronicle in my journal, the deviations from that plan. These deviations if chronic and debilitating are the demons that must be defeated. The symptoms appear first, failure to follow the pretrading checklist, failure to take a valid entry, failure to follow position sizing rules, moving a stop to accept a greater loss, taking profit earlier than planned, you get the idea. At the end of each week, I daytrade, I have enough evidence to analyze. I pick the biggest problem I have and place the emphasis on correcting it the following week. But, most importantly, my plan requires me to undertake a period of introspection and record it in my journal.

It is important to understand WHY, I commit this repeated deviation from my plan. I didn't take the trade. Why? I didn't like the setup. Why? Blah, blah, blah.... bottom line after wrestling with the problem I need to come to an appreciation of what it is about my personality that causes me to engage in this self defeating behavior.

Now, I am not saying that a pattern of skipping trades is necessarily the symptom of a trading demon and maybe I want to write some discretion into my plan. maybe these violations are not chronic or debilitating. If I don't journal and review, I will never know.

Next I will cover the specific analysis of the trading demon that is the subject of this thread.

later,

Archie