“Why does it happen to me?!?!” — Losing in trading
About a year ago, one of the MarketZone followers wrote me an email with this headline. The trader explained how it has blown out several accounts already and that it seems to him that every time that he enters a trade, the market turns against him, or in his words “They are hunting me down”.
Naturally in order to try and help, I needed some more background and I found out that the trader is in his 20's, been trading unsuccessfully for almost 3 years and he has been trading mostly Forex (Currencies and Commodities).
Side note — There is a thesis, which I tend to agree with, saying that young aged traders struggle more than older age traders when they enter into the trading world. Despite the ability to grasp technical analysis faster and to use trading technology much more efficiently, young aged traders are blowing their accounts much faster than older age traders. Why is that?
Psychology!
At younger age, we are more implosive, we want to conquer the world (and to do it fast!), we want everything here and now! Psychology and the lack of discipline and patience definitely gives the older age traders the edge over the younger ones.
So.. back to the story..Once I gathered some information that helped me to understand the background, I scheduled a private chat with this trader. I usually keep private chats to my Elite Zone members (which opened only later, on May 2014) but this guy’s email really got to me and reminded me the time I was seeking help when I felt that I can’t get anything right when it came to trading.
During the chat we had, I was interested in seeing this guy’s trading decision making process so I asked him to show me how he picks a trade and actually to trade one. It was a tricky request since, according to his emails, this guy was a swing trader, so for a swing trader it wasn’t suppose to be an easy task to find a good trading opportunity on the spot (In the Weekly Markets Analysis and the Elite Zone I usually send out trading ideas that need to monitored till all the terms are complete and the setup is ready to be traded).
Falling into my tricky request, he found one trade in $GBPUSD, took it and a day later, he was stopped out with a loss.
In the next chat we had, a day later, I revealed to him the insights from our previous chat session:
- Forcing a trade — Settling for low accuracy setups just for the purpose of being in a trade
- Oversize position — Traded 1 Lot in a small account
- Tighter then required stop loss order — Probably due to the position size
Notice how I didn’t have anything to say about the technical analysis that he had made. It simply wasn’t the problem. Although being a low accuracy setup (simple support and resistance technique), it was actually correct. If he had used some of the techniques I show in the Weekly Markets Analysis and the Elite Zone, he would have seen that he traded against the higher time frame trend and against a higher time frame harmonic trading pattern…but since the market’s movement is random, his technical setup could have easily be a successful one.
Technical analysis is hardly never the problem, and if it is, it is a problem which can easily be fixed. The Zones strategy provides highly accurate technical setups and it can be taught.
The 3 insight I shared with this trader was all about Psychology, Trading plan and Discipline, which, as I mentioned above are the clear disadvantages young traders have when they enter the trading world.
To sum up this short story, after sharing my insights, I gave this trader 3 simple advises/rules to implement in this next trading attempt:
- Write down a trading plan before entering a trade — If it wasn’t written in advance, don’t trade.
- Reduce position size to 1/10 of what you used to trade — By reducing position size to a really small size, you are experiencing trading without the effect of greed (and fear)
- Follow my lead — Follow the MarketZone, see the trading ideas, learn from them, adjust and adapt them to meet your trading system.
Though he is not yet successful, he hasn’t blown an account for almost a year.
“Don’t focus on making money; focus on protecting what you have.”
Paul Tudor Jones
Happy new year to all the MarketZone followers and all you technicians out there!
