Who Hesitates May Lose
In a publication called “Speculation as a Fine Art”, Dickson Watts wrote, “Look before you jump but not when you jump.” Good advice. We should do our diligent research and prepare a plan before the execution. Once that decision is made, it’s not the time to hesitate. It’s time to be patient and wait. Everything comes to him who waits.
During a hot streak, executing the plan is easy, but during a drawdown, it’s a bit of a different story. What did we learn in 2015? Over the past year, the first quarter proved tremendous. However, not so in April. That was a big rougher.
Less if More Even in Trading
Whether it’s a winning streak or a losing streak, we should never judge a system on a long streak. Trading using low-intervention algorithmic trading systems may help to keep hindering emotions aside. We should not allow emotions to get in the way of making good strategy selection decisions.
There are several techniques for choosing trading strategies at any point in time. Typically, we should reduce leverage ahead of big news events. This year, there were reasons to believe the system would keep doing well in the EUR/USD. But our heavy reliance on the equity curve this year made for some substantial losses, unfortunately.
For some of us, the beauty of the equity curve skewed our judgment, serving to bring about costly lessons in trading discipline. Let’s hope we le
arn from our mistakes.
Impulsive Trading can be a Mistake
For many traders, overtrading can become a hindrance. It’s not difficult to get excited about the abundance of available trades due to the 24 hour nature of FX. Remember that not all trades are created equal. Some trades have a better ratio of reward to risk. We may see a preponderance of patterns all heading in the same direction with some trades while others don’t have any significant pattern, even though we’d like to imagine they will. Overtrading happens as a result of a feeling of lack. We feel we must leap on all the opportunities before they vanish.
It’s at that moment that we need to take stock. There will be plenty of opportunities tomorrow. There’s no rush. FX is open 24 hours a day. No need to be impulsive. Although that poor risk to reward ratio trade may add value to your P/L, it also may not.
Though you may have a mix of auto strategies and discretionary trades running, it may be wise not to mix the markets running on auto with those running in discretionary. The benefits of automated trading became obvious this year because the ‘bot’ doesn’t get tired of looking for trades.
Automated trading can actually help us become better with our discretionary trading. It does the hard work for us and frees us up to focus on other trades. Auto trades can help cushion the risk gap of discretionary trades that are less likely to succeed.
