The dangerous part is that I actually had some big wins from this kind of behavior, too.
This part really stands out. Being rewarded for putting on a trade you shouldn't is almost like going backwards. But clearly the reward is often enough that the behavior is reinforced.
But I will say this, to completely contradict exactly what I just said above. Considering that any one trade, over the long run, will have maybe a 60/40 or 40/60 win rate, doing the wrong thing isn't exactly always the wrong thing in my opinion. I will tell you what I hate doing.... I hate shorting a swing low or buying a breakout of a swing high. These things will very often retrace, but you of course don't know how high they can go first. Maybe you can get 5 or 10 points out of it before it comes back. Now clearly buying every swing low won't work either, because that would be too easy. Sometimes you buy it, and it continues to drop like a rock, thereby making you think you should have shorted it, and now you're back to going against what you don't really want to do.
So, what I'm thinking going forward, the only way to get myself out of my own rut, is just to realize that I'm predicting the future, which hasn't happened. Mark Douglas talks about this alot. No matter how good a setup looks, we are still predicting a future event that hasn't happened yet. I think our brains are pretty good about picking up on nuances, something very difficult to code, and especially after we have been watching price move for thousands of hours, which many of us here have. So when we put on trades that we think later we shouldn't, is it really so bad? Maybe we saw something good which made us want to override a firm rule.
Saying all this, when we say we are doing bad things, like you trading in the middle of the night, is it really so bad when you consider that its not like you ever had an 80% or 90% chance of being right? If you're gonna beat yourself up about a trade you took that you shouldn't, does this mean that you knew deep down there was an 80% chance the trade would fail? Of course not. It just so happened that it did, and then you go looking for a reason for why you shouldn't have put it on, as if this would have saved you. The whole idea that we can stay out of bad trades is I think the fallacy. We can blame the time of day, blame our mood, etc., but so often, that trade will sometimes work and sometimes not.
So I think in the end, the only thing we can really control is what are we gonna do about it. If you hang on too long, maybe that's the mistake, it turning into a big loss, but entering to begin with perhaps isn't so bad. Sure its nice to have 5 different things all line up before you enter, but does this really lead to a 90% win rate? And how long are we waiting for this perfect setup?
I mentioned this before and I will mention this again. After putting 100 trades in a spreadsheet and tracking both what I got out of the trade and what I could have gotten, there was always a sweet spot of using something like a 5 point stop and a 10 point target. Some stupid trades maybe were instant losses, so my entries could have slightly improved, but the idea that I could forecast which trades worked in advance was a total fallacy. It was almost better to just place my bets and rely on my OCO orders to manage the trade.
I think this way, you take emotion out of it, and by keeping the trade size small, and expecting to put on dozens of trades before you come to any conclusion, this is easier emotionally. (In my opinion you're trading way too big for your account size, so every trade outcome is important for you).
We know that if you have only a 50% win rate but get 10 points profit for every 5 point loss, you will be absolutely printing money. But a 50% win rate will mean 5 or 6 losses in a row (which could be 25 to 30 ES points lost). These 5 or 6 losses are incredibly painful for high leverage, and it will make you doubt yourself, but this is 100% within the statistical expectancy of a 50% win rate system. I see this happen so often in a monte carlo simulation. After 200 trades, the system is printing money, but its easy to find a stretch of 5 or 6 losses in a row that would totally demoralize you.
So if your drawdown comes from you taking on bigger losses than you should have, then perhaps this is the problem, but taking a trade in the middle of the night that looked good at the time but resulted in a loss is perhaps not the real issue. It could have just as easily won, and then you wouldn't think its a problem. Just because a trade lost money doesn't mean there is a problem after all. The real problem is when this loss affects the next trade, which it clearly does because you often say you're packing up early. And its just as bad to pack up early after a good trade, because maybe there were gonna be 4 more winning trades.
I love watching
@schizo post his trades because he just keeps going. I haven't added up his points, and he clearly might not be posting everything, but based on what I see, he takes his losses like a champ and just keeps going. It seems like he is doing it right.
