Today, let's talk about a tale of two traders. Let's assume that both have been trading for the same period of time. Both have the same starting capital, same trading dome, same market, and both are using the exact same trading system with precise entries and exits. We are going to leave the traders to trade for the next 60 days and see what results they have come with. Would you be surprised to find that one trader would have a 20% return and the other would have a loss of 40% during that same period. I am fascinated by the fact that two people, given the same opportunities to make money, can get very different results.
I think that the answer to success (be it at trading or at life) lies within each of us and that we are completely responsible for our own results in trading (or in life). Too often, we blame our trading results on outside events, circumstances, or other traders. The typical excuses would be: the "market" was against me, the big players were out to get me, they knew exactly where I had my stop, etc.
Not to long ago, I read a book that discussed how, to a certain extent, your trading discipline was a matter of integrity. Not exactly the kind of integrity that you would normally associate with that term. More importantly, this integrity has to do with how you adhere to your specific trading rules. This integrity has to do with: Are you being honest with the commitment you have to trading your trading rules?. Do you move your stop if a trade is going against you? Do you justify moving your stops because you think a trade that you are in is going to make money? Have you moved your limit order (to take profits) because you "have a feeling" that the market is going to continue to move in your direction? All of these actions would violate your commitment to your rules and thus violate your integrity.
Once you have a strict set of trading rules, one of the most important things that you can do is follow those rules to the letter. For me, using the "integrity" analogy helps me to look at a trade and say, "Is this a trade that fits all of my trade criteria? Can I follow my trading criteria to the letter on this trade?" If all criteria are met for the trade, then I take the trade and set my stop and limit orders. Then the hard part comes into play. If I am up a little, my natural tendency is to start to move my stop up. But that's not a part of my trading strategy. My strategy says, "If my trade is up 1.50 points, I can move my stop to break even." Not a tick before. If I were to move my stop before then, I would be violating not only my integrity, but also my trade rules.
I realize that I spend a great deal of time going over the mundane topic of trading psychology. The reason is it has been my experience that the mindset of a trader can determine to a great degree the profitability of a trader. Take a look at my beginning comparison of the "Tale Of Two Traders". My question to you is this? Which trader would you rather be? Work hard at following you trading rules. Set objective and realistic goals and... Catch a Whopper.