One of the best books on trading I've read in a long time is not a book about trading. It's called the Power of Habit -- currently a top-seller on Amazon.
But what is trading but a series of habits... Some CP traders (consistently profitable) do the same thing over and over and make money. They tend to have certain key rules like - manage risk (don't take big losses) and then focus on their bread and butter trades.
Think about your most recent losses. Chances are (I'm going to guess 99%) - your last loss happened because "you weren't following your own system". You "didn't place a stop order"... You "averaged down". Or maybe you just had a bad streak and followed your system.
My last loss was completely off my plan. I won't even go into it -- but it involved about 3 bad decisions... none of them remotely connected to any rules I've written down.
I do have a system that involves looking for symmetrical 3-bump patterns -- and entering on b/os -- entering in the direction of the trend... and setting a stop that is usually no more than 8 ticks away. I even found a trade like that real-time -- which I bought in a paper account -- only to sell too early. (nonetheless, the trade was right and profitable.)
This is the trade -- /cl.
There was a similar pattern in XCO -- a stock I've been following today - which then ripped almost 10% from the same 3 bump pattern.
I've heard of traders making the same mistakes -- after 10 or even 20 years of trading.
And I've done the same thing. And why? Why do we fall into the same bad habits? Because the key to successful trading is to replace bad habits with good habits. There is a tendency to take outlier trades -- those times are probably prompted by a moment of frustration, boredom, fear (we just missed a good trade)... There's a tendency to fall into old habits.
The first thing to do to improve is to start monitoring one's habits. What do we do that is helpful and gets us into the right mindframe? When do we have a tendency to take a bad trade? Or not place a stop.
Chances are there are triggers for bad behavior and for many traders -- they are unaware of those triggers. Awareness, however, is the first step. Because any habit -- can be changed or modified to suit your needs.
Good trading is doing the same thing over and over again. So if you are doing something that you know is detrimental to your bottomline... stop and analyze what is triggering the bad behavior. And then find an alternative solution (maybe walking away from the screen, or rereading your written down rules) - to avoid repeating the same negative actions.
Your habits will dictate your success. Perhaps some people are just better at self-discipline and regulation. But no matter what -- self-discipline is a skill that can be improved if one focuses on it.
Change your habits, change your life. Let's face it -- we can all improve in some aspect of our lives.