I received the following email from reader Brent:
Dear Bella,
I have followed SMB Capital since WSW on Mojo and have been following the blog for several months now. I am impressed by the quality of content that you guys release and it has helped my trading greatly. I am a remote trader for a prop firm and have been trading for 11 months now. My trading follows a very specific pattern. I have long periods of small to mid sized winners and then I have one large loss that wipes out almost all of the gains. Every time I feel like I have corrected this problem it seems to return. After this happens I always feel demoralized and like I am not cut out to be a trader.
My question for you is how do you overcome being a stubborn person. A few weeks ago on the blog you mentioned that one of the traders realized what he needed to do to become a better trader was to be more patient and to be more patient as a trader he would have to become more patient as a person. I have clearly identified the issue for me as being stubborn.
I sensed weakness today in the Casinos and started to put on a short position. I spread this out over PENN WYNN and LVS. Penn was the largest position and the one I felt had the biggest potential. I put on a small position in the 27.50s with the intention of using 27.63 and 27.73 as my stops. What ended up happening is I capitulated at the top having held a trade well past where I knew made sense. The problem: I was stubborn. I recognize the problem and I want to fix this. I feel this single personality flaw is what is keeping me from really developing as a trader.
If you have any suggestions on how I can work on my stubbornness as a trader or as a person for that matter I would greatly appreciate it. Thank you for your time, enjoy your weekend, and keep up the amazing content on the blog!
Bella Responds:
1) You can become a successful trader. You have found patterns that work for you and are positive on most days. This is excellent work! This is a terrific foundation from which to build! Well done!
2) OK, so now that we have you off the ledge :). Let me me offer this comment. If you are stubborn in your personal life this will permeate your trading. You need to work on this. The talented trader who recognized his trading suffered because he himself was impatient, concluded correctly that he needed to do more things in his daily life that built personal patience.
3) We teach our traders to develop an exit plan for if a stock trades in their favor or against them before entering a trade. We call this having a detailed trading plan before every trade. This is one of our trading fundamentals for One Good Trade and must be followed. And then the next fundamental is discipline. If your stock hits your exit price for if it trades against you then you must hit the stock.
4) You can build the skill to hit stocks that trade against you. If you have trouble hitting stocks that reach your exit price, then start doing visualization exercises. Find a quiet spot, breath deeply for two minutes, then rehearse a trade that hits your exit price and visualize yourself hitting out of this stock, then repeat. For more about using visualization to improve your trading see TraderFeed and the excellent work of Dr. Steenbarger. TraderFeed should be daily reading for every trader.
5) I will leave you with this quote from the great Jesse Livermore: “Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight. But being wrong–not taking the loss–that is what does the damage to the pocket book and to the soul.”
8 Comments on “Traders Ask: How Do I Work on My Stubbornness?”
These “Dear Mike” blogs are becoming a really great series of posts. Thx for the insights.
These “Dear Mike” blogs are becoming a really great series of posts. Thx for the insights.
I love the sentence you quoted from Jesse Livermore! Cool!
I love the sentence you quoted from Jesse Livermore! Cool!
I know exactly how this guy can feel.
I had the same problem. Making nice profits and than they disapeared by one trade.
So conclusion was i can take profitable trades but need to work to stay away from this one bad trade from time to time.
How did i do this? Write a preday trading plan of what i will watch at and how i’ll trade.
FOcus only on these charts that i marked as potentially rewarding.
Habe a plan before something happens. Marked levels were you will buy/sell and where you would place your stoploss and profittarget. When i enter a trade everything is attached to the order before i enter.
Sometime i enter only a stoploss together with the trade but this is the most important part of trading.
Having a trading plan, respecting it and RESPECT YOUR STOPLOSS.
In the evening i write my after the tradin day review.
I do this all by hand becase there is probe that by writing by hand you mind can save the date better and longer.
I also try to do some testing through the week. Mostly around 150 test trade in blocks of 30 trades a week.
So i can train myself in a short time and keep my skills up and improve them.
I also starting working with a coach on mental side. For me this has helped me a lott and i can say that i’am now for 95% the trade i could be and wanted to be since a long time, were big drawdowns are not part of my trading anymore. If they used to happen 10 times now they happne only 1 time. SO big improvement for myself.
It takes a lott of work, but trading is the most rewardable job in every way.
I know exactly how this guy can feel.
I had the same problem. Making nice profits and than they disapeared by one trade.
So conclusion was i can take profitable trades but need to work to stay away from this one bad trade from time to time.
How did i do this? Write a preday trading plan of what i will watch at and how i’ll trade.
FOcus only on these charts that i marked as potentially rewarding.
Habe a plan before something happens. Marked levels were you will buy/sell and where you would place your stoploss and profittarget. When i enter a trade everything is attached to the order before i enter.
Sometime i enter only a stoploss together with the trade but this is the most important part of trading.
Having a trading plan, respecting it and RESPECT YOUR STOPLOSS.
In the evening i write my after the tradin day review.
I do this all by hand becase there is probe that by writing by hand you mind can save the date better and longer.
I also try to do some testing through the week. Mostly around 150 test trade in blocks of 30 trades a week.
So i can train myself in a short time and keep my skills up and improve them.
I also starting working with a coach on mental side. For me this has helped me a lott and i can say that i’am now for 95% the trade i could be and wanted to be since a long time, were big drawdowns are not part of my trading anymore. If they used to happen 10 times now they happne only 1 time. SO big improvement for myself.
It takes a lott of work, but trading is the most rewardable job in every way.
Thank you Bella and Peter for both of your advice.
Talking about my mental mistakes and even the positive mental attitudes are something that help with my learning process so I will share my thoughts. This is just as beneficial as reviewing trades with others.
Today I found myself in the same situation again and I took careful notes of my emotion as the trade moved against me. The most common type of trade that this behavior occurs when I am in something I feel had tremendous reward to risk potential. The trade I have a strong belief on are often the ones I find myself breaking the stops on. The trades I view as just feelers I never break my stops. Here are the cycle of emotions for trades which I have a strong belief in. When I am in a losing trade that I still believe in its as if demons have possessed my soul. My entire mentality shifts from opportunity seeking, to frustration, denial, anger, capitulation then finally disgust. The first stop is the hardest one to break because one you break that you can find yourself rationalizing what its ok to do it again.
The absolute worst thing I think that can happen is when you break your stops but you find yourself rewarded by the market. This is positive reinforcement for a negative expectancy approach to trading. I want to point out that this behavior type is not an everyday occurrence but the fact that it happens at all bothers me because it it severely limiting the amount of money I can make.
Right now the most important thing for me is to focus on having a positive frame of mind. When holding on to losing trades I have a very toxic frame of mind. When I am in winning trades I have a healthy opportunity seeking frame of mind. I must come to truly accept that losses are part of trading,
Things I am realizing are
1) Losses are part of trading
2) Breaking stops is disrespecting yourself
3) Having strong beliefs about trades opposed to just rough ideas can lead to very large losses.
Thank you Bella and Peter for both of your advice.
Talking about my mental mistakes and even the positive mental attitudes are something that help with my learning process so I will share my thoughts. This is just as beneficial as reviewing trades with others.
Today I found myself in the same situation again and I took careful notes of my emotion as the trade moved against me. The most common type of trade that this behavior occurs when I am in something I feel had tremendous reward to risk potential. The trade I have a strong belief on are often the ones I find myself breaking the stops on. The trades I view as just feelers I never break my stops. Here are the cycle of emotions for trades which I have a strong belief in. When I am in a losing trade that I still believe in its as if demons have possessed my soul. My entire mentality shifts from opportunity seeking, to frustration, denial, anger, capitulation then finally disgust. The first stop is the hardest one to break because one you break that you can find yourself rationalizing what its ok to do it again.
The absolute worst thing I think that can happen is when you break your stops but you find yourself rewarded by the market. This is positive reinforcement for a negative expectancy approach to trading. I want to point out that this behavior type is not an everyday occurrence but the fact that it happens at all bothers me because it it severely limiting the amount of money I can make.
Right now the most important thing for me is to focus on having a positive frame of mind. When holding on to losing trades I have a very toxic frame of mind. When I am in winning trades I have a healthy opportunity seeking frame of mind. I must come to truly accept that losses are part of trading,
Things I am realizing are
1) Losses are part of trading
2) Breaking stops is disrespecting yourself
3) Having strong beliefs about trades opposed to just rough ideas can lead to very large losses.