I hate it when people say that “trading is 90% psychology”, but the longer I trade, the more I think that percentage might be just a bit low. I mean, I cannot begin to tell you have many times I have made some stupid mistake trading because of my emotions. (Here is a secret: it still happens all these years later. Anyone who tells you different is lying.)
We are not robots. As humans, we have emotions. Lately, I have been following a lot of what “Trader Tom” has to say. He has a unique take on a lot of things, but to be honest – he’s right. After all, when you are doing things correctly, it’s probably going to be uncomfortable, so he says. I agree.
I have learned that most trades, maybe 90% or more of them, are basically “filler.” It is just a handful of trades that I find make up the largest portion of my gains overall. This is why it is imperative that you keep your positions small to start out with, and then add to those winners. It is through adding to a position when the market has proven you correct, the trader can make really strong returns. The fallacy of being correct all the time is simply that – a fallacy. This is the type of bullshit you see on Instagram. Real traders aren’t found on Instagram.
Sometimes, you need to simply walk away from your desk and let the market do its job. I have found that getting away from the chart is the best thing I can do on trades in order to ‘let them run.’ I have also found that in my case, the best trades tend to run for about a week or two. That isn’t all the time, and it is clearly are major breakdowns or breakouts that you get those chances, but you must be willing to let the market pay you. I mean, how many times have you looked at a chart and say, “Hell, all I had to do is buy/sell that pair and hang on for 6 months!” To be honest, those setups happen a lot. However, you have to be able to let it work out for you.
That includes letting the trade turn around and take you out. Hence the idea of small positions and building on them when you are proven correct. The best thing you can do is let the market work for you…
The fact is that you don’t need to place a lot of trades. Also, technical analysis is only worth so much. I make my living as a technical analyst and trader. I would be the first to admit that technical analysis is about probabilities, not certainties. Unfortunately, far too many people out there are looking for the perfect system. The best system I have found is to add to a position that is making you money, and getting out of one that is costing you money. It sounds simple, but it is difficult. In fact, this is the “Holy Grail.”