Iíve been slowly learning to intraday index trade. The index, especially the smaller time-frames, is a difficult instrument to master. Overall things are sort of progressing. My technical knowledge is sound and the system I use is robust.
But I have recognised a significant obstacle to my success.
Surveying my trades I notice a reoccurring pattern. My trades can be nicely grouped into ďtechnical tradesĒ and ďemotional tradesĒ. My technical trades follow my rules, and demonstrate patience and discipline. My emotional trades in contrast, disregard my rules and are driven by hope, fear, greed etc.
My trading week just gone has been riddled with emotional trades. Just last night I was ďcertainĒ, (without any technical or experiential basis) that ABC would happen. I took a number of trades just like this one. Lo-and-behold, things didnít go to my plan.
I seem to cycle through periods of pure technical trading, broken up by emotional trading. When this occurs my results swing form consistent profit to consistent loss. And so the cycle continues. It is frustrating to have a profitable trading system, comprehend the rules of that system and know how to apply them in real time, yet to be repeatedly undermining myself with acts of random trading.
As a rule I donít consider myself overly emotional. In my life outside trading I tend not to get carried away emotionally. In fact, even as I write this I struggle to comprehend the impact emotion has had on my trading, because my emotional experience isnít blatant. Iím not smashing keyboards, cursing monitors nor kicking the family dog. My emotion is far more covert than that, operating by stealth, unseen, unheard.
I am confident (or hoping!) that virtually all intraday traders at some time experience what I am experiencing now.
Weíve all read countless stories of successful traders losing $1000s or $100s of thousands of dollars, at some point in their trading career. J.Livermore is a classic example. Hereís a trader held in high regard who more than once went bankrupt because he lost sight of the rules that governed his trading. I assume this was in part due to emotion clouding the analytical mind.
Iíve read research concluding that functional sociopaths make the most successful traders because emotion doesnít get in the way of their technical analysis. The sociopathic option isnít a viable avenue for me (given lobotomies are no longer practiced).
Is there another way to weed out this reoccurring divisive pattern in my trading? Iíve spent a great deal of time patching the hundreds of holes in my trading dingy. But unless I patch this one, me and my dingy are going down.
Iíd appreciate hearing how other ASFers who have experienced the same cycles that I now find myself stuck in. What was your experience? How did you move through this period of your development? Any tips?