When it comes to trading, we want you to achieve confidence. We want you to have confidence in your approach, the process you follow, your own skill set and your own judgement. That is why we teach you how to be independent, as eventually a day will come when you no longer need us for guidance and that is what we are working towards as we want you to be consistently profitable but more importantly know how to do it in your own unique way.
However, when it comes to confidence there is a very thin line between that and arrogance.
The title of this article is with good reason as you are only as good your last trade, this is a similar mind-set to what professional sports people have as they are only as good as their last match.
The reason for this is because while you can be confident its important you don’t over step the mark and become arrogant as this is something many traders do and what typically happens is that the market will humble them once again.
A lot traders have this mind-set that they need to be always right against the market, as though they have something to prove. In the scenario when certain traders are right they feel that they are better than the market like they have been beaten it.
The ironic thing though is whist you can care about the market; the market doesn’t even know you exist let alone care about you.
That is why it’s important to leave emotions at the door and the only way to do is by trading systematically using principles that give you a process to follow step by step every single time.
However, we are only human and when we are doing well or getting positive results we feel better about ourselves that is why it is important to continue following the process because if we continue to follow that same process our emotions do not interfere with our decision making.
Some traders however, when on a winning streak or perhaps had a big winning trade let their emotions get the best of them, as what was once confidence can quickly become arrogance and because of this they diverge from the plan/process which then allows emotional behaviour to surface.
Once you become arrogant you can then become cocky and what this will lead to is you diverging away from the process even further. Your mentality will begin to shift from if & then to I know.
We never know for certain what the market will do next but once we begin to think this way we can get into big trouble fast. Because instead of admitting we are wrong we dip our boots deeper into the ground by becoming stubborn
Now when it comes to a winning streak, when do they end? When we don’t want it to the most as that is the point we are typically the most invested. Now it might not be financially but instead emotionally.
When a trader is on a good winning streak and has already diverged away from their principles do you think they will continue to trade with the same position or increase it?
Odds most traders will increase their position size on the next trade as they again convince themselves they know what the market will do.
At that point they convinced ourselves that the trade will go in their favour and any other reality is not acceptable and this is also known as the ‘Hot hand fallacy’. We believe the winning streak will go on forever until on the next play it comes to an end.
Now this is where trading is like a double-edged sword because if the trade does win the trade has been rewarded for bad behaviour as the won a trade but broke principles of their plan and disregarded the process.
But if the trade loses hopefully it will be a wakeup call that they need to remember that what they are doing is wrong and need to go back to trading the plan because not using the plan saw them take a loss.
Now you can have 5 winning trades but that one losing trade is the one that you will remember out of all of them as that is the trade that caused pain, fear, panic and anxiety.
Now even if you trade with the plan you will still feel negative emotions when incur a loss because following the plan does not remove emotions it just allows you to have control on the situation by knowing how to react moving forward. Along with this when you take a trade and it was just a systematic loss it doesn’t hold as much weight unlike when you go against your principles and take a trade you know you shouldn’t have, as that hurts much more because you recognise you just cost yourself money for no reason…self-sabotage.
As when you incur a loss a trader has a few options;
1. Take a step back, reflect that they diverged away from the plan by either ignoring the principles set or made a mistake and accept accountability that the loss was down to their own actions and then go back to trading with the process.
2. Refuse to accept defeat that they were wrong ignore their principles again and revenge trade.
When it comes to revenge trading nothing good comes of it usually as you aren’t focused on the task to find a high probability setup but because the pain of knowing you took a loss does not sit well and so a trader will look for any reason or any setup to get involved to correct the emotions they are feeling. By making back what they have lost. But again, the same problem comes back around…arrogance. As they will be willing the market to move in their favour or do what they want when they find a reason to enter. Now again when it comes to the market it does what it wants when it wants but traders forget this factor.
We then come back to the same scenario the market either rewards them for bad behaviour or they take a loss and the cycle continues.
Now because they aren’t looking for high probability setups the odds are that when they are losing trades they are in fact losing more money than when they are right and making money. What will then happen is that the trader will slowly bleed out until nothing is left.
This is sad and unfortunate but a story all too real as it has happened many times.
It is easy to diverge from the plan that is why we teach you how to be accountable for your actions, as accountability is what a lot of traders are missing from their trading.
That is why we teach the method that when you win or lose any trade how did that result happen?
Was it a good trade taken or a bad trade taken?
Did you win because you broke your rules to get their or did you win because you followed the plan and it was just another win and the same goes for when you take a loss?
This type of review for each trade allows you to have the opportunity to hold yourself accountable for your actions and its pointless lying because it is only your money you are trading so you are only damaging yourself if you do not correct the ways of your errors.
Be honest and be accountable for yourself because In trading a man can feel like a god in the morning and idiot by the evening.
You are only as good as your last trade depending on what happened in that trade will dictate your future moving forward.
Thanks for reading,