As algo traders, we have an edge over all other traders who are attempting to forge their pathways in the hinterland we call the Stock Market.
As algo traders, we forge our own path because we have a proven system that guides us like sonar on a submarine 1000’s of feet below the ocean’s surface yet devoid of emotions. All we need to do is follow the path.
As algo traders, we sleep easy at night, knowing that the Sherpa we hired keeps us from tripping and tumbling like a drunk on a Saturday night into the crevasses lurking every mile, mile, and ½. We are comforted knowing every dark dawn drawdown is only temporary as our accounts keep reaching higher and higher levels of equity.
If only it were that easy
Unfortunately, we are human and human beings seek comfort whereas the market rewards us for being uncomfortable.
We’ve all lived through those teeth-gnashing, monitor-bashing, screaming at the dog times when it seems like every trade is a loser. I’m sure I don’t have to remind of the incredibly frustrating periods when all your small winners disappear like hard-earned wages at the roulette table on the next losing trade.
Out of Step
At times every system gets out of sync with the market and, when it does, inevitability the muscle between your ears will steer you into that place you should never go, “This system is a dog (we’re really picking on dogs today, eh).”
Stepping up to the plate to take another swing at the ball hurtling at you at 100 MPH gets harder and harder. We somehow rationalize the best way forward is, “Let’s wait until we see some winners” so we don’t enter the next trade and sure enough – you know what happens – it is not only a winner but a BIG winner.
Back in we go, but undoubtedly this next trade is a loser. Our pain continues. We start to believe all we have to do is trade exactly opposite to what our brain tells us to do.
The system is making new equity highs but we’re not.
And that, my friend, is the rub with trading an algo system or any trading system.
This past weekend I had the opportunity to watch a talk by Jack Schwager outlining the differences that distinguish top traders from the rest of us. In the video, Schwager confirms as human beings, we are poorly designed to be successful in the markets. He goes on to state that every system goes through bad periods (as does Howard Bandy). The trader that says he can live through a 30% drawdown starts to panic at 10%. Even when they know that their system has a proven edge.
One point that really stood out in this video was that all of the top traders Jack Schwager interviewed the majority, if not all, kept their own personal money in their own trading accounts. Why? Because they felt it was the safest place for it.
Now that is having belief in your trading and your system!
A Mindset of a Consistently Successful Trader
So how do we create the mindset of a successful trader? Maybe it is as simple as recognizing what we are doing and then telling ourselves we are a consistently successful trader.
Use an affirmation or a positive statement about what we want to be, or have, or do. It should be stated as if it has already been achieved. It’s in the bag. It’s a done deal.
One such statement might be – I am a successful trader who always follows the rules of my system.
But use positive statements avoiding negatives, like don’t or doesn’t. “ I am a successful trader who doesn’t break the rules of my system,” is not a positive statement because you’re using the word doesn’t. Interestingly our subconscious won’t hear the “doesn’t.” What gets imprinted in our minds would be, I am a successful trader who breaks the rules of my system.
That is not the message we want to adopt.
By stating the outcome we desire, as if it has already happened, we begin to condition our subconscious to believe it. As our belief grows, we gain confidence in ourselves and begin to see opportunities where before we didn’t. Taking these opportunities leads to success, which increases our confidence, then more success, then more confidence…we are continuously expanding our levels of confidence and self-trust.
Belief in Myself
A few years ago I decided to climb Mt. Adams, the 2nd highest peak in the State of Washington. I had never climbed a mountain before but believed I could with every fiber of my body. Many wondered if I had totally lost control of reality and asked how did I know I could do this. My answer was I didn’t know and wouldn’t know until I tried.
What I did have though was a belief in myself. I wholly believed I could do it. That didn’t mean I attempted it without a plan. A plan that took care of fundamentals like; training, knowing which permits were required, loading the trip into my GPS so we wouldn’t get lost (something I used a lot) and ensuring I had the right equipment.
To this day it is one of the highlights of my life. All because I believed I could.
Building confidence in yourself gives you the ability to tune out those negative headlines. Your approach to trading and following your system becomes more effortless. You allow the edge of your system to play out. You will see drawdowns for what they really are – just small steps backward to ever-increasing levels of equity in your account.
Not only that, you will sleep easier at night.
We’re the Plan in “Plan your Trade and Trade your Plan” – TraderJanie
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