Are You an Overconfident Trader?

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Hi Mike,

I’ve been trading awhile and I’m certainly getting better at it.

I’ve noticed a recurring problem. Whenever I get a good streak going and I start feeling like I’m getting the hang of it, I hit a losing streak. Sometimes it’s a week or two of gains everyday and then a slow meltdown to give it back. I do not lose it in a couple of trades rather a slow meltdown. Also, I have a problem on building on a good day. I many times start the morning off great and when I try to make a good solid day into a great day I just get off my game and slowly give back my good day as well. Very similar concepts just on different time frames (to talk trading jargon).
Generally, my analysis and ideas are very solid I just lose some discipline after being up on the day or on longer time frames being up over a week or two.

I’m sure you have thoughts on this problem, if you can share them with me that would really be beneficial.


This has happened to me in the past as well as regards to having a good streak and then a bad one. For me the issue is overconfidence. There are streaks where you feel like you will never lose money again. You take your median P&L and forecast your year from those numbers—and then Mother Market enters the room and slaps that nonsense out of your trading head.

The overconfident trader trades with too much size in non-conviction trades, doesn’t lock in gains, sets bigger stops than normal, doubles down, and doesn’t prepare as well. Perhaps you slide in at 8:15 in the morning instead of at 7:30. Perhaps you’re long three lots in a B trade when you should be long one. You move that stop to 50c rather than the normal 26c. You add size in someone else’s conviction trade. There’s a very fine line between underperforming as a trader and trading like a pro. The overconfident trader is an underperforming trader.

When I’m trading well I glance at my P&L and voice internally: “Wow I didn’t realize I was up that much.”  When I am overconfident I look at negative P&L and internally pronounce:”I will make my day in this big position I have.”

So go back to the basics. What are you best trades? Get in more of them. How should you prepare for each open? Do that. How do you take money from that market? Make sure you stick with that. Push yourself to improve each day with new plays and set ups with responsible size and world class review.

I hope this helps.


One Good Trade

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