From the Mailbag – Part 3

BellaGeneral Comments, Mike Bellafiore's (Bella's) Blogs8 Comments

I received this question the other day and thought we could discuss it. Ok so here goes…

Rusmin Says:

Friday, June 19th, 2009 at 3:24 am

I want to ask you a question. But before I ask you that, I want to tell you something.

I had a similar day where i took a huge rip. I f**ked up fifteen times in a row. After that I was so depressive, i couldn’t sleep. I lost my self-confidence. The difference between me and you was, that I hadn’t so much experience like you. Things come to my mind like “I will never master the markets”. After I analyze all my trades, I came to the conclusion that I will only trade my best set-ups.

So my question is: why we can’t stick with the rule only to trade our best set-ups ???

If we always trade our best set-ups than it is almost impossible to get a huge rip. I know that we are human beings and that we will make mistakes. But to got a huge rip you made a lots of mistakes and didn’t trade your best set-ups!!!

I don’t know the answer. Perhaps Dr.Steenbarger can help us.

My personal theory: We have this unconscious instinct or drive always to change things. Without this drive we wouldn’t have this technological development. Boredom is a human killer.

Bella:

So why don’t we just trade our best set ups? Well first that would not be a good idea. We do not trade only our best set ups because we make more money trading our best set ups and other setups that are statistically appealing.

But when our confidence is shaken we should slow down our game. And we can do this by trading only our best set ups.

I only make trades that I recognize as statistically profitable trades. I have a play book of set ups hat work for me. When I see one, then I pull the trigger. Now all my plays are not as statistically sound.

Let’s use baseball to help us explain. Let’s say that I know that I hit .380 for fastballs thrown down and in. When I see such a pitch I am hacking. But if I also hit .300 on fastballs high and down the middle, then I should swing at this pitch as well. As long as the trade is statistically profitable for how you trade you should pull the trigger. And you should make as many trades like this during the month that you can find. Hence the birth of the active trader.

My trading set ups all have a 60 percent plus win rate with a downside of 1 and an upside of 5.

But if you make a trade because you are bored, without recognizing an edge, this is just bad trading. These are trades you must eliminate. And you should start with visualization exercises to correct this issue. And Dr. Steenbarger, TraderFeed. is a great resource to help.

Last night Roy Davis of SMB Remote Training and I went to the Suzy and Jack Welch discussion at the 92nd St Y in NYC. Most interesting comment of the night was when Mr. Welch said, “Employees should constantly over deliver. The best thing you can do is make your boss look smart.” I need to get a transcript of this discussion and slap it on the desk of all of our traders.

Don’t forget to follow us on Twitter!.

8 Comments on “From the Mailbag – Part 3”

  1. I have traded for many years and now have extremely clear and rigid parameters.

    That is the good news ! Despite all this I still make the boredom/impluse/idiot trade. Maybe, as you said, we are all wired for this.

    The solution is that immediately you make the impulse trade you must acknowledge that that is what you have done. Just get out immediately.

    Then, crucially, do not berate yourself for making the impulse trade but congratulate yourself on rectifying it.

    Trading is a lonely business and, if unsuccesful, can play havoc with your self-esteem.

    So, acknowledge that you are fallible and vulnerable. Then ,,,,onwards and upwards !

  2. I have traded for many years and now have extremely clear and rigid parameters.

    That is the good news ! Despite all this I still make the boredom/impluse/idiot trade. Maybe, as you said, we are all wired for this.

    The solution is that immediately you make the impulse trade you must acknowledge that that is what you have done. Just get out immediately.

    Then, crucially, do not berate yourself for making the impulse trade but congratulate yourself on rectifying it.

    Trading is a lonely business and, if unsuccesful, can play havoc with your self-esteem.

    So, acknowledge that you are fallible and vulnerable. Then ,,,,onwards and upwards !

  3. Thxs for reading and the question. Enjoy the weekend. Better days ahead for you.

    Bella

  4. Thxs for reading and the question. Enjoy the weekend. Better days ahead for you.

    Bella

  5. I think boredom/ Impulse trades done by me create frustation and loss of self confidence. I am slowly trying to fight this tendency by keeping a running note book filled with my observations regarding my perception of market behavior, how other traders are trading, Possible scenarios of market movement. This helps me clear my mind to some extent and fills the need for some action. Being from an academic / teaching background helps me here. I also find many traders find it amusing that I keep reading / writing most of the trading day and jumping into action sporadically.

  6. I think boredom/ Impulse trades done by me create frustation and loss of self confidence. I am slowly trying to fight this tendency by keeping a running note book filled with my observations regarding my perception of market behavior, how other traders are trading, Possible scenarios of market movement. This helps me clear my mind to some extent and fills the need for some action. Being from an academic / teaching background helps me here. I also find many traders find it amusing that I keep reading / writing most of the trading day and jumping into action sporadically.

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