"Over 500 pips since Monday now. Best streak yet...I feel a draw down coming on and I'm ready for it." This was a recent quote from Joe, a member of the Live Room. At first glance most traders are immediately drawn to the 500 pips part and the mind blowing excitement of being able to make that in just three days. However, myself along with a few other members in the room enjoyed the last part of the quote even more. "I feel a draw down coming on and I'm ready for it." This part of the quote really shows the maturity of this trader. Newbie traders often suffer from two common downfalls, overconfidence when they're on a winning streak and lack of confidence when on a losing streak. This basically means that when they're winning, they expect to keep winning which can lead to taking ill advised or impulse trades. And on the other hand, when they're on a losing streak they either A) stop trading because they're scared/depressed, or B) take impulsive trades due to the need to get revenge and make their money back. I've written about this topic before, but seeing how the markets have been umm...interesting as of late (to say the least) I figured that I'd touch on it again. As a trader one of the best things you can do is know your normal win rate. Obviously this number will change as you sharpen your skills over time and newer traders will have to rely on their back testing stats, but it is key that you are aware of what your average win/loss percentage should be. I say this because knowing this number will keep you humble during big win streaks and optimistic during long periods of drawdown.
Personally my overall win percentage usually ends up being between 40% and 55%. I know it's not the greatest win percentage in the world and it doesn't blow any minds, but it's become pretty consistent as well as profitable so it works for me. But that's beside the point. The point is that I have a pretty good idea of how many trades I should win/lose each month which gives me a certain peace of mind during a losing streak and a sense of reality during a winning streak. By peace of mind I mean the feeling that everything is going to be okay and I'll make a comeback over time, and by reality I mean knowing that with all of these winners, a streak of losing trades are sure to come, and I accept that.
This month (and the previous two) has proven to be a great example of how rocky the road of trading can be. I began the first two weeks of May going 5/15 in the live room which is a win rate of 25%. This week I turned it around and went 8/12 or 66%. If you add all of those numbers up you'll see that despite both the losing and winning streak, I ended up right back where I'm usually at (48%). Excited for the comeback? Devastated by the drawdown? Nope it's simply expected. I bring this example up because almost two years ago I went through a similar streak. However, back then I got rattled and decided to stop trading after the 5/15 and I ended up missing all of the winners that would have not only brought my win percentage up, but would have tripled the amount that I lost. It's very embarrassing to think about those times, but I feel it's important to keep those memories so that I will NEVER make them again. (That's what brings me pain, for you NAC folks).
"The longer you fall, the closer you are to the bottom." This simply means that nothing last forever and just as each passing second of falling brings means that your just closer to landing on your feet and being able to climb back up; each loss simply brings you closer to a win that will not only bring your win percentage up to speed, but your account as well.
Personally my overall win percentage usually ends up being between 40% and 55%. I know it's not the greatest win percentage in the world and it doesn't blow any minds, but it's become pretty consistent as well as profitable so it works for me. But that's beside the point. The point is that I have a pretty good idea of how many trades I should win/lose each month which gives me a certain peace of mind during a losing streak and a sense of reality during a winning streak. By peace of mind I mean the feeling that everything is going to be okay and I'll make a comeback over time, and by reality I mean knowing that with all of these winners, a streak of losing trades are sure to come, and I accept that.
This month (and the previous two) has proven to be a great example of how rocky the road of trading can be. I began the first two weeks of May going 5/15 in the live room which is a win rate of 25%. This week I turned it around and went 8/12 or 66%. If you add all of those numbers up you'll see that despite both the losing and winning streak, I ended up right back where I'm usually at (48%). Excited for the comeback? Devastated by the drawdown? Nope it's simply expected. I bring this example up because almost two years ago I went through a similar streak. However, back then I got rattled and decided to stop trading after the 5/15 and I ended up missing all of the winners that would have not only brought my win percentage up, but would have tripled the amount that I lost. It's very embarrassing to think about those times, but I feel it's important to keep those memories so that I will NEVER make them again. (That's what brings me pain, for you NAC folks).
"The longer you fall, the closer you are to the bottom." This simply means that nothing last forever and just as each passing second of falling brings means that your just closer to landing on your feet and being able to climb back up; each loss simply brings you closer to a win that will not only bring your win percentage up to speed, but your account as well.
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