Stop Worrying, Just Take the Right Action, Do the Right Thing
Stop worrying about how much % you can make, or how much money you can make, etc. There is some level of this that needs to be worked out when placing a trade to get a decent feel of the reward risk ratio. And there is a dream and vision component where you try to figure out what you want in life. But after that, don’t be thinking about how much you can make on any given day or week. When dealing with the market, you simply don’t know. There may be one week you make +50%. Another week you may make only +5%. Another week you may lose -5%.
It can be a good idea to free yourself from expectations or results. And just focus on doing the things that can get you the money. You may not know on what day or week or month exactly, the money will come. But if you do the right things, correctly, then the successful trades will eventually come. Whether that is in one hour, one day, one week, one month, or a few months, etc.
The late Ari Kiev, who was a psychiatrist and trading coach at Steve Cohen’s SAC Capital, wrote in his book, A Strategy for Daily Living:
Focus your attention on the action to take in the next moment without being distracted by concerns about the result. Such a day-by-day strategy transforms stress and breakdown, failure and error into possibility of breakthrough and miracle by giving you a perspective for processing events so that you stay on the track of your vision.
There will be some days you are on top of your game. You chain together 2, 3, 4 or 5 amazing trades in a single day and make so much money. You say to yourself: “My, my I didn’t know I could make so much in a single day, but I just did.”
There will be other days you can’t find any opportunities. You try your best, but don’t really know what is going on. So you stay out or only take really small positions. You can’t catch all the moves. NO one can. So stop beating yourself up.
As Stanley Druckenmiller recently said in an interview:
I don’t play when I am lost. I know in the future I won’t be lost.
Other days are mixed with some winning and some losing trades and you are flat. Other days you may have so many losing trades, but they were small, and just one winning trade was enough to make the loss back and give you a good profit. Other days you are having so many losses in a row and you think you may never have a successful trade again.
The difference is this: You can cap your risk, while your reward can be multiples of your initial risk.
You can control your draw downs, and let your profits run where appropriate. You can improve and better yourself from this moment onward.
You can stay out of more bad trades.
You can gain a better feel of the markets.
You can discover and develop the needed market beliefs, revelations, strategies that you need to go to the next level. If you have made it this far and survived in life with whatever you currently know, then imagine how much better life can be when you know and understand more and turn problems into opportunities?
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The Market Doesn’t Care How Much Money You ‘Need’
The market doesn’t care about how much you think you need, or what new toys you want to buy, or how much in debt you are.
For example, a trader that thinks he ‘needs’ to make $3,000 by the end of the month in order to pay his credit cards. He goes and tries to force trades to happen and position sizes wildly with a small account to try to take what he thinks he ‘needs’ from the market. Well, the market doesn’t care! Just because you think you need, the market doesn’t have to give it.
Take another example in Reminiscences of a Stock Operator where one trader wanted to buy a fur coat for $10,000. The trader tried to get the money promptly out of the market and forced a few trades. He promptly lost $6,800 dollars.
As Reminiscences said:
The hope of making the stock market pay your bill is one of the most prolific sources of loss in Wall Street.
Another example is from the book Market Wizards. One trader wanted to buy a castle for $350,000. So he put on an abnormally large position. He ended up losing over $600,000 in a single trade.
The market doesn’t care whether you want $5,000 or $500,000. It just does it’s thing every day. The principles of the market never change. What changes, is people’s perceptions of the trading principles and emotions and actions not based on the market reality.
That is why it is best to judge the market conditions first, dispassionately if possible. As close to truth and reality as possible. Then you can take the proper action to find the proper trades and proper position size. If those market opportunities and trades happen to line up with a lot of money for you, then you did well. If there is a dearth of market opportunities, then you can’t ‘force’ the market to give you the profits just because you think you ‘need’ them.
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4 Responses to Random Thoughts – September 12, 2013