How many traders out there trade like this;
1) Fund account after defining strategy.
2) Make a series of trades and a small profit (generlly 1-2 trades per day, your losses are smaller than your wins and everything is good).
3) Have a losing streak and start trading more (working harder).
4) Get back money lost
5) Go back to making a series of trades and profitable again
6) Have a losing streak and trade more
7) In trading more, have another losing streak adding to the losses.
8) Now in a hole in which the negative expectancy of your actions make it very hard to get out of.
In other words, you have the balls to Lose (by trading more aggressively after taking some losses) but not the balls to win (maybe you make a small win and call it a day because you don't want to be greedy (but really it is that you fear giving back what you've made).
If you think about it, you are l playing Russian roulette with your account because in your actions you are allowing the possibility of the losing streak to occur and then be added to. But in the winning streak you are cutting it short and limiting your profits.
Another way of looking at this is that you are expanding your efforts whilst you are in bad form, or the market is not in sync with your strategy. And limiting the efforts on your good form.
Or.. You are letting your bad form run and cutting your good form short.
It's perfectly natural response, all be it a dangerous one, but as you can hopefully see, your actions are creating a negative expectancy and it's only a matter of time before the dreaded equity curve dive.
Anyway I traded this way for a number of years and have always wanted to make a thread about it. It's very interesting if you think about it.
The CURE? Maybe if there is any interest, that can be another post. But for now just a ramble.
G/L
1) Fund account after defining strategy.
2) Make a series of trades and a small profit (generlly 1-2 trades per day, your losses are smaller than your wins and everything is good).
3) Have a losing streak and start trading more (working harder).
4) Get back money lost
5) Go back to making a series of trades and profitable again
6) Have a losing streak and trade more
7) In trading more, have another losing streak adding to the losses.
8) Now in a hole in which the negative expectancy of your actions make it very hard to get out of.
In other words, you have the balls to Lose (by trading more aggressively after taking some losses) but not the balls to win (maybe you make a small win and call it a day because you don't want to be greedy (but really it is that you fear giving back what you've made).
If you think about it, you are l playing Russian roulette with your account because in your actions you are allowing the possibility of the losing streak to occur and then be added to. But in the winning streak you are cutting it short and limiting your profits.
Another way of looking at this is that you are expanding your efforts whilst you are in bad form, or the market is not in sync with your strategy. And limiting the efforts on your good form.
Or.. You are letting your bad form run and cutting your good form short.
It's perfectly natural response, all be it a dangerous one, but as you can hopefully see, your actions are creating a negative expectancy and it's only a matter of time before the dreaded equity curve dive.
Anyway I traded this way for a number of years and have always wanted to make a thread about it. It's very interesting if you think about it.
The CURE? Maybe if there is any interest, that can be another post. But for now just a ramble.
G/L
Time hides Nothing
