The Trading Process - Follow The Plan - Step 12
I see comments like these everyday, especially in many of the retail trader blogs:
"I had a losing day today, so I think I need to add a filter..."
"After 4 consecutive losses, I have to go back and re-test..."
"Starting today, my plan is now that I will double my position after a loss, to recover more quickly..."
Maybe you've even said one of the above. All of them spell Trouble. With a capital T.
The lesson is simple: Once you have a well thought out, well researched plan, STICK TO THE PLAN!
Next: Don't Overleverage
Good post Kevin, can I add to have realistic expectations?
ReplyDeleteYes, great point! Too many people think 100% a year, with a 5% drawdown, is realistic. Those people are usually quickly disappointed.
ReplyDelete"Don't Overleverage"
ReplyDeleteWhat's the rule of thumb here? In other words, how do I know when I'm over leveraged?
That is step 13 in the process. I'll post that either later this week, or early next week.
ReplyDeleteQuick answer: It really depends on the instrument, and your style. So, for example, if you are trading ES overnight, and you are trading more than 1 contract per $10K in your account, you probably are overleveraged. Risk of ruin, and maximum drawdown are 2 ways to measure this.