I opened my micro-account in order to put into action my plan to test some things, and I observed that even with micro-lots there is an emotional element to trading. Even if I trade with 0.0001 of a cent!!! (To a more dampened degree I must admit, but the point is I notice that the emotional element is still there). This surprised me.
It's actually an important discovery, because it obviously means it's got nothing to do with the money. Its about the need to be right, and the fear of being wrong.
The other day I was listening to a lecture by Mark Douglas, author of Trading in the Zone - and he was talking about this exact thing. The need to be right and the fear of being wrong have no place in trading - they just shouldn't be there. If you have a certain method of trading you believe in, then all you need to do is do a big enough sample size, which for him was 30 days, or 30 trades or what ever. If you see that your method is right 18 times out of 30, then thats all you need to know, right?
Yet to be honest, I find its not that easy. The opening of my micro account was for this exact purpose, to take sample sizes, and do them according to the rules and by the book. Yet I find myself still mucking about with idiot things... My level of discipline is currently rubbish, it needs to be improved RIGHT NOW.
Anyway, just chucking this out there.
Thursday, February 1, 2007
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3 comments:
Hi simon, this is an interest bit of information. I stumbled on this guy who wants to hit $1m starting with just $1k. in 200 days. I would like to see how he is able to control all the emotions. http://forex200.blogspot.com/.
It's interesting that Douglas would say if you win more than not, it's a good system (or were those your words?). Sounds like the need to be right to me. The fact is that a 30% win rate can produce excellent results. I blogged about just that thing recently.
Having to have a better than 50% win rate goes along with the need to be right/not be wrong.
One thing to consider if you find yourself going away from your system/method is that maybe it's not the right one for you. If you can't stick with it, there's a disconnect in there somewhere.
Thanks for your comments John. I think one main problem I have right now is trying to test too many things at once, I jump around a lot. Need to focus on one method at a time, that's my next step. I'm really talking about individual trade setups here - I'm trying to test about 6 different ones simultaniously when I should jsut stick to one until I've got it down.
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