Optimism is terrific but a mind full of nothing but cheerleading can seriously damage our wealth.
Today I started a new way of trading that will keep me in trades for a longer time. The idea is that the shorter the time frame, the more noise in markets and therefore the less clear the signals. Short term chaos, long term clarity is not a bad watch-phrase.
My absolute profits, profit per trade, profitable trades and (therefore) expectancy will all go up. That’s the optimistic side. The reality is that losses will be nominally larger too, although I am pretty sure there will be many fewer of them.
That’s worth repeating. The dollar amount of losing trades will be larger than I’m used to.
As I have just discovered, sticking with a wider stop-loss point can be painful. To date my exit points have required only a relatively small dollar loss, and the time to either find profit or loss is less. The pain of sitting with a losing position – or positions – is almost greater than that of actually losing money. That’s crazy, of course, because there is no physical pain involved.
Such is trading though. Pain of being wrong, or the possibility of the account shrinking is worse than actual physical pain or real loss. The key is to trust the system and build a base of experience so that when I’m feeling weak, I can stick with it. Spreadsheets are my friend.