This is a great book by Bo Yoder. Apparently, my desire to have a high win rate, even at the expense of missing some huge trades, is a common mistake among traders. He has even helped large firms optimize their proprietary computerized trading systems. Over time if I adjust my emotions to handle more scratch or losing trades, while letting the trades run more, I could most likely quadruple my net profits. I need to forsake some emotional pain, for financial gain. It comes right back around to the concept of Zen. The "need to be right" is often stronger for traders than the need to make money! The EGO is destructive in trading.
Inspired by this latest concept, I am going to start checking my setups and see how much profit was left on the table vs. how many break even trades or losing trades there were while going for runners. I think I may be shocked at how much better I can do by allowing my ego to get bruised some. The next step obviously will be to start adjusting my trading style. The systems signals will still be just as valid, but I can also utilize the indicator for exits. I have been tracking two possible mechanical exits based on the indicator. It appears both would offer much greater potential than going for 1 point. The second of the two would really allow for greater profit at times, maybe triple. In addition it would greatly reduce my trading fees and stress levels.
Looking back on my research so far, it looks like I was trying to use the 1 point to prove the system had a consistent edge. In doing so I failed to understand that in most cases the risk to reward ratio is more important.
He really explains how many traders come close to making it, very close, but fail. Based on my history, I know I am on the right track. I am in the toughest phase of the process right now.
This was a surprisingly relevant book and I highly suggest all traders read it and find ways to analyze the systems they use.
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