Please forgive my rudeness but in this article, I will discuss the reason I am such an asshole when it comes to trading rules. I may piss a few people off but there is a reason to my madness. Read on…
I haven’t written in this blog for quite some time. Maybe I should start back up…
Ok Here goes. Point blank, if you get pissed off, or your feelings get hurt by what I am about to say, please do the following…
1. Take your trading computer and smash it against the wall.
2. Cry out for mama.
Now why would I say this? The reason is this. Trading is a career choice, not a game. This is a skill that can feed your family or create the life you have always dreamed of. If you are a gamer and get thrills by trading the wild swings… If you get your rocks off by feeling the emotions of fear and panic or greed and thrill, then play your little game and go off to gamers world and find your other cartoon character fake people to play with. Use your magic pack of childhood wonder and play. Play till your heart is filled with joy. But don’t you dare ask me why you lose constantly if you can not follow the rules that have been laid out for you.
Take a look at the following equity curve.
Nw this is from my forex signals via twitter. Do you see the dips in equity? Some days, we have several losers in a row. Does this mean we should scrap the system and mark it off as a losing system because we have several losers in a row? Nope.
There are basic rules in place to create this performance. We can back test these rules to show a probability of success. What happens if we begin to break the rules? I will show you in the following little narrative.
Lets create an example set of rules.
Rule #1 – Buy on a break of the high.
Rule #2 – Sell on a break of the low.
Rule #3 – Take profit at 20 pips
Rule #4 – Take a stop loss at 20 pips.
Disclaimer- This is just an EXAMPLE and not an actual set of rules.
Ok lets say that this rule set works and has worked over the past 10 years. Well, one day someone wil come along and say, ” instead of buying at the high, what if i buy 2 pips before the high. Then another guy will come along and say, ” instead of buying 2 pips from the high, why dont i buy 2 pips from the high only if the rsi is above 70? And then another guy will come along and say, ” what if i buy 3 pips from the high when the rsi is above 70 and the macd is turning. Then another guy will come along and say, ” I can buy if Rsi is above 70 and macd is turning n high volume. Then another guy will come along and say, ” What if buy when there is high volume and macd is turning and stochastics are confirming?”
Do you see the cycle? Do you see how the trade no longer makes sense and does not in any way resemble the original rules?
This is what happens all the time. A trader has a set of rules that work and then Joe Bow and his cronies come along and think they can do better or somehow make the rules better. Before long, they have a losing strategy and who gets the blame?
The creator of the original rules gets the blame and it goes a little something like this, ” Yes Joaquin Trading sucks! I tried his shit, lost 3 freakin trades in a row! I tried everything to make it work with rsi, macd, etc… and his stuff is so bad! stay away!”
Well here is one thing to remember. If you ever find a trader or trading educator that has a nasty results record or loses 90% of the time, you have hit a gold mine. Think about it for a second……
Thats right, just do the opposite of what he is doing and make a fortune!
Now back to the rules…
If you have a rule set that works, why try to change it? If you can prove that it made money over the past X number of years, why screw it up? Thats the same as saying, ” Yeah there is a guy who randomly shows up at my house each morning and gives me $100 but I think I can make him give me $300.” Before long, you will be the one giving him $100 every day.
Trading is not a game. It is your job, your business, your money on the line. Trading is a way of life to allow you to live life to the fullest. If you want to play, then play on demo or play is a small account. If you want to succeed, find a system that works and do it. Don’t change it.
I wish you success!