Thursday, December 30, 2010

George Costanza Rules

Trading is hard, there I said it.

The markets are very humbling at times.  In fact there have been streaks in my trading career where I couldn't buy a winning trade.  No matter whether I went with the trend or bucked the trend, as soon as I placed an entry into the market I was a loser in an instant. It almost seems that the market is waiting for me to make a decision and as soon as I enter the market a secret signal is sounded to the trading gods, the message is lets screw with Dave's head.

These streaks are brutal to ones psyche.  It is very easy at these points to take a bad situation and make it career ending.  While I haven't lost my career during a losing cycle I have made some tremendous trading mistakes that have financially set me back.  What is worse than the lose of money is the loss of confidence. As a trader our biggest asset as well as our biggest liability is our brain.  In order to trade you must make decisions and ones confidence in themselves as paramount.  If you doubt yourself or become timid when a good opportunity comes around you will do damage to your profitability as well as your level of confidence in your decision process.

So during one of these cycles I decided to try something radical, and that was to borrow something from the Seinfeld show.  I used the George Costanza rules for trading to guide me out of this trading rut. For those who don't remember the episode where this rule came from, here is a brief synopsis. George decided that he was a loser in all aspects of his life.  He wanted a better job, a prettier girlfriend, he said every decision he had made through out his life was the opposite of what it should have been.  So to change his situation he was going to go against all his natural instincts.The results were life changing for George, he got that prettier girlfriend and landed his dream job.

If it worked for George why wouldn't it work for me. The joke is at first this plan worked, I suddenly started my next few trades with a profit and closed them out as a winner. I jumped from market to market and kept winning.  Then I started to think again, and the streak ended. 

Using the Costanza approach didn't help my confidence level one iota, in fact harmed it more.  But there was a positive that came out of my trial.  The trial made me look at my game plan, and whether I was executing that plan effectively.   It turns out I was trading like a junkie.  I was trading so often that I never really had a game plan and I was trading emotionally. I was trading my P&L and not the actual trade and was trading irrationally . In further blogs I will discuss the above common trading pitfalls and many more I have seen executed by myself or the 100 plus traders I have backed.

Happy and healthy New Year to all

The Evolving Trader

No comments:

Post a Comment